§ EARL RUSSELL rose to call attention to the new Regulation on Capital Issues, and to ask His Majesty's Government—
- 1. Whether the present Regulation has been withdrawn.
- 2. Whether, in the promised modification of this Regulation, care will be taken to limit it to the purpose for which it is really required, and to avoid unnecessary and harassing interference with business.
§ The noble Earl said: My Lords, I shall try to put my Questions so as to escape going outside the somewhat severe limits which the noble Earl the Leader of the House laid down the other day in dealing with the matter of Questions and I think at any rate I can safely promise His Majesty's Government that I shall ask no question and expect nothing to be answered which is not actually upon the Paper.
§ It is, perhaps, useful for one moment to look at the history of this matter before I ask the specific Questions. Your Lordships will be aware that a Treasury Regulation, so-called, was issued, stating that no capital issues should be made without their 693 sanction, or, as I think the official phrase had it, no capital issues "ought" to be made. This was thought sufficient throughout the actual conduct of the war, but at no time had it any legal sanction, or had it, so far as I know, any effect upon those who disregarded it except that of preventing securities so issued from being quoted on the Stock Exchange. Then there came a period when the war was over in all but a technical sense, and suddenly, without consultation with anybody, so far as I know, in the industrial or financial world—except apparently the Stock Exchange—the Treasury issued a most drastic Regulation under the Defence of the Realm Act making illegal retrospectively all the things done without Treasury sanction during the previous three years or so. I think the consternation that was caused by that Order is sufficient excuse for calling your Lordships' attention to it to-night.
§ When the matter was raised in the other House, so great was the feeling exhibited there that an assurance had to be given—I think on the same day as that on which the matter was raised—that the retrospective part at any rate of that Order would be withdrawn; and I think we may understand that it is gone. But before the new Order which is to be issued comes out, those responsible for advising the Treasury should carefully consider the course they are going to pursue, and should not make the Order any more than is necessary to achieve the object desired. The object desired by his Majesty's Government and by the Treasury, as I understand, is one with which I think all good citizens would sympathise. It is, as I understand, to conserve the cash of the country and make the surplus of the country as far as possible available for Government loans and expenditure, rather than for ordinary industrial undertakings, with the exception of such undertakings as the Treasury think would be useful for reconstruction purposes, and should be undertaken during the transition period. I do not suppose any one would object to that object.
But let me call your Lordships' attention to the Regulation which has been actually issued. First, quite at the beginning, it says—
No person shall, except under and in pursuance of a licence granted by the Treasury—(a) issue, whether for cash or otherwise, any stock, shares, or securities.
The words "or otherwise" are very wide, and cover every possible way of issuing stock. They cover, for instance, the mere conversion of a person's interest in the stock. I have in my own mind at the moment a case where there is a certain undertaking, which happens quite by accident to be not in the form of a company, but in which one person has two shares, another one share, and a third person a fourth share, being altogether three sets of persons or companies concerned in the undertaking. Merely for convenience it is desired to convert into a limited company, with share capital, and to divide the share capital in proportion to the three interests. That cannot be done without the licence of the Treasury, and yet it does not involve the transference of a single penny of cash. It is merely another mode of stating the interests which already obtain in an existing concern.
Further on the Regulation says that no person shall—
(c) sub-divide any shares or debentures into shares or debentures of small denomination or consolidate any shares or debentures of a larger denomination.
Under that Regulation as drawn up a limited company, which has a stock certificate showing for instance that a man is entitled to one share of £10, may not substitute for that another piece of paper which shows that he shall be entitled to ten shares of £1. Yet that would not involve any drain upon the capital resources of the country, or the transference of a single penny. I am told that the objection of the Treasury is that smaller shares are more negotiable. But what has that to do with the object of the Regulation? Or is it a legitimate interference with business at the present time?
§ Then there is a paragraph which says that no person shall "renew or extend the period of maturity of any securities." A banker may make a loan, and he may take, as bankers do, as collateral security, a debenture which gives him something specific to look to as security. He may arrange that that debenture shall mature at a fairly early day. Supposing that debenture matures and the customer wishes to renew the loan; be is not at liberty to renew the debenture without the licence of the Treasury—again a transaction which involves the passing of no new money or any drain upon the resources of the country. Yet it is prohibited by this Regula- 695 tion. Again, there is a Regulation to the effect that no shares are to be transferred which have been issued during the period when the Regulation had no statutory authority. That, I suppose, will disappear when the retrospective part of the Regulation goes, but I submit to the Government and to your Lordships' House that it is not necessary to make these Regulations go beyond what is desired.
§ There is a further provision which prohibits the buying or selling of any stock or other securities except for cash. I really do not know exactly what "except for cash" means. Does it mean for one payment on one day, or that the whole consideration must be cash? If, however, it does not involve the taking of new money from the public, what is the reason or necessity for it? It may be said also that the Treasury have always been perfectly reasonable, and that the New Issues Committee have always dealt with cases in a reasonable spirit, and that no hardship has been caused. First of all there is the question of delay, which in the past has been very great. We have been assured that in the future it is to be reduced. I hope that is so. We have also been assured—and this I hope the noble Lord will confirm—that applicants will have an opportunity in the future of a personal interview. I am not so sure, however, that it can be rightly said that the Treasury are always reasonable in the matter. I have within my own knowledge a case where the Ministry of Munitions, having made a loan to an industrial concern and having asked to take a debenture for it, the Treasury refused, to allow the issue of that debenture to a new Government Department. If that is the spirit in which matters are approached it is not the ordinary spirit of business.
§ I should like to ask specifically the two Questions which I have put on the Paper. The first is as to the old Regulation. Is it in force at this moment, or has it been withdrawn pending the issue of a new one? If it is in force at this moment, it is causing so much difficulty and anxiety that I have been unable to obtain an official copy of it and have been forced to get a copy from the newspapers. There is so much anxiety to know what are the penalties and obligations under the Regulation. The second Question I ask is that the new Regulation when issued may be confined to the actual purpose desired by the Govern- 696 ment, and shall not apply to what are merely paper transactions, which do not involve the taking of new money from the public, and particularly that it should not put difficulties in the way, as pointed out in another place, of ordinary transactions between industrial companies and their bankers. The Government have said over and over again that they desire as far as possible to remove all control from industry, and desire to put industry upon its feet again, so that it may run its natural course. Yet here you are controlling things which, as far as I can see, have been put under control merely for the pleasure of controlling them. I hope that the Government will, in the new Order, limit it to its legitimate purpose—and even that only for a limited time—of preventing capital from being diverted into foreign adventures or harebrained schemes, when it is wanted for the purposes of the Government.
§ LORD HYLTON
My Lords, the noble Earl has put two Questions on the Paper, and I will reply to them at once. The first Question is whether the Order in Council, dated February 24, has been withdrawn. It has not formally been withdrawn, but it is not proposed by the Government to take any action to enforce the prohibition contained therein, and it will be superseded by another Order in Council as soon as the Chancellor of the Exchequer has had time to reconsider the question in all its bearings. That is an undertaking which, as the noble Earl mentioned, was given in another place, when criticisms of the Order of February 24 were made in a rather acute form.
Delay has unavoidably taken place in issuing the new Order in Council owing to the fact that the Chancellor of the Exchequer is at the present time engaged at Paris. But a new draft has been prepared and will be submitted to the Chancellor as soon as he returns, which, I am informed, will probably be at the end of this week. In these circumstances the noble Earl will perhaps forgive me if I do not deal with some of those detailed objections which he raised to clauses and phrases in the Order of February 24. As I have told him, action is not being taken under that Order, and I hope that when he sees the new Order in Council which is to supersede the present one he will find that some at all events of his objections have been met, and that he will no longer have any grievances on that 697 point. I think the House will see that it is only fair that the noble Earl and those who think with him should await the issue of the new Order before further attacking that which is not at the present moment being proceeded with.
With regard to the second Question which the noble Earl has put, it is certainly the intention of the Chancellor of the Exchequer, in drawing up a new Order in Council, to do everything in his power to secure that any new Order does not hamper in any way honest or legitimate business; but he has come to the conclusion that it is necessary to continue the control of capital issues in a modified form, for three main reasons which I will give to the House. In the first place, it is important that steps should be taken to prevent any avoidable drain on the foreign exchanges. The noble Earl in his opening remarks indicated that he realised the fairness of that point. As any of your Lordships who are acquainted with these matters know, the export of capital involved by people in this country investing their money in foreign securities would necessarily cause the foreign exchanges to become unfavourable to this country.
The second reason that prompts the policy of the Chancellor of the Exchequer in this matter is that such steps as are possible should be taken by the Government to induce an adequate flow of capital available for investment into channels necessary for the speedy restoration of commerce and industry and the development of public utility services. To put it in other words, His Majesty's Government are anxious that firms engaged in enterprises which are in the national interest should not be prevented by lack of capital from continuing their operations.
A third reason—I do not know that I am justified in saying that this is the most important, but at all events it is an important, reason—is the importance of controlling capital in view of the maturing Public Debt. I am not referring at this moment to the Funded National Debt, but to the maturing Public Debt. Perhaps some of your Lordships are not aware of the colossal figures already reached by this Debt which matures before March 31 next year. I will give them to your Lordships. This is the Debt maturing before March 31, 1920. Treasury Bills, other than those held as collaterals or other loans which are shown later on, amount to 698 £900,000,000; Exchequer Bonds, those called certain, £179,000,000, and those at the option of the holder, £68,000,000; loans in the United States of America, £55,000,000; Japan, £19,000,000; Canada and the other Dominions, £48,000,000; and in neutral countries, £26,000,000. Besides these there are outstanding Ways and Means advances—that is, by the Bank of England and by Government Departments and Funds—of not less than £447,000,000; and there is what is known as Morgan's loan in the United States of America, which is £16,000,000.
This is probably not a convenient opportunity for a detailed examination of the appalling total of the National Debt, but I am glad. to see that my noble friend Lord Faringdon—than whom no member of your Lordships' Hours is more qualified to deal with such matters—has put down a Notice to call attention on March 25 to the state of the national finances. The general public seem quite indifferent and apathetic to the state of things, and they surely need enlightenment such as I hope they may receive from the debate which will take place on Lord Faringdon's Motion. Fresh burdens are every day falling on the shoulders of the taxpayers. Your Lordships may have noticed in to-day's newspapers the figures which were given in another place last night as to the amount that is now weekly being paid in unemployment donations. It is £1,200,000; and this despite the fact, the notorious fact familiar to every one of us, that in agriculture, on the roads in domestic service, and so on, there are thousands of jobs waiting to be filled.
I hope I may be pardoned if I venture to mention, to your Lordships what struck me as a typical illustration of the complacency with which the most enlightened people seem to regard this state of things, asking that more and more money should be provided by the State for any and every object. It occurred only last night, when the most rev. Primate—who, I am sorry to see, is not in his place at the moment—turned and rent me because I suggested that some quite indefinite expansion of the cost of providing guide-lecturers in public galleries should be borne, or partly borne, by visitors to those institutions. The most rev. Primate seemed to indicate that this additional expense had only got to be borne by the public and that that 699 did not matter. It struck me that the attitude of his Grace was typical of the way in which people in this country regard any expenditure that can be thrown on to the State at this moment. I can only hope that the right rev. bench will give a little of their leisure to studying the liabilities of the nation at this time, and, having mastered the elementary facts, use their great influence in pointing the obvious moral of the urgency of public as well as private economy. I did not gather from the remarks of the noble Earl that he was attacking the necessity for some Government control in these matters. I think at the outset he admitted that some Government control was necessary.
§ LORD HYLTON
Quite so. But I think any one who has studied these questions—and surely they are questions which at this time even the most thoughtless citizen ought to study—must be aware that there was never in the history of this country a greater need for vigour, judicious vigour, on the part of the Chancellor of the Exchequer. You may deplore any general control by the Treasury in this or other matters, but I, as a private member of this House, venture most emphatically to assert that had control been exercised by the Treasury in a greater measure during the last four years, hundreds of millions of expenditure might have been saved to the country.
§ LORD BUCKMASTER
My Lords, I am sure your Lordships will appreciate the obvious anxiety of the noble Lord who has answered this question to give us all the information in his power, and that anxiety is well evidenced by the fact that he has furnished us with a number of most useful, suggestive, and instructive figures which are, of course, as he will well understand, in no way strictly relevant to the questions he was asked to answer. The real questions he was asked were whether the present Regulation was to be withdrawn, and whether the new Regulation was to be modified.
§ LORD HYLTON
I am sorry to interrupt the noble and learned Lord, but I venture to think I did answer specifically those two questions.
§ LORD BUCKMASTER
I am sure the noble Lord will not think I am complaining, for I am quite satisfied he gave into the fullest possible extent all the information he was able to obtain to answer these questions. At the present moment we are governed in a strange way. It appears that the heads of Departments are engaged in various occupations, and that nobody is left in their place to conduct what appears to me to be some of the most important and critcal affairs on behalf of the nation.
If I understood the noble Lord aright—it, may be I misunderstood him—the present position is this. The existing Regulation is not withdrawn and the new Regulation has not yet been issued, but the Government have expressed their intention of taking no proceedings to punish the people who break the existing Regulation. The result, therefore, is that at this moment there is no Regulation at all, although it is suggested that the imposition of such a Regulation is of the most urgent and vital importance in order to conserve the nation's capital for the purpose of meeting some of the many and imminent obligations to which the noble Lord has referred. I submit that this is a most unsatisfactory position for us to find ourselves in. Either these Orders are really important, or they are not. If they are important, they certainly ought to be operative in a form in which any person who offends against them shall be adequately punished and restrained. If they are not, they ought to be at once abolished without further delay.
I believe it is right to say that every one who is satisfied that restrictions are necessary in any direction will be ready to submit to these restrictions. I believe that is true On the other hand, it is equally true that people will no longer submit to restrictions unless they are satisfied that they are necessary. The restrictions to which this country has willingly, I may almost say cheerfully, submitted in the past are restrictions which are beginning to gall and irk them very considerably now that they regard the reason for their imposition as passing away. This very Regulation to which the noble Earl has called attention is an excellent illustration of what I mean. In the first place, it is to be remembered that the very worst thing this Government can do is to cause capital to be wrapt up in a napkin and kept unused; yet that, of course, is part of 701 the result, because you are not at liberty to use it as you like but as somebody else thinks proper.
§ LORD HYLTON
I am sorry to interrupt again. I cannot, of course, speak on behalf of the great capitalists, but I am informed that great capitalists are not in the habit of wrapping up their capital in napkins, because no interest would be derivable. Therefore all that we can do is to issue such Regulations as may induce them to put their capital into concerns of national importance.
The noble Lord, if he will forgive me for saying so, occupies this awkward. and. uncomfortable position—that he is the only person we can attack when we desire to attack the Government and it is extremely difficult for us because we recognise that, so far as the noble Lord is concerned, he is doing all lie possible can. He says that money is not wrapped up in a napkin. Indeed it is. It is on deposit in the bank in vast quantities, and although it is perfectly true that some interest is being earned, yet unless that money can be used by the banks themselves in a wealth producing manner for the purposes of the country, the use of that money is absolutely arrested.
The most important thing that can possibly be done at this moment is to use capital in connection with labour for the purpose of producing wealth. It is the only way in which wealth can be created, and the more you impede, arrest, and hinder it in the smallest degree the longer you will prolong the difficult, and I think the dangerous, position in which this country stands, and the more difficult it will be for it to meet obligations which are near to our doors. The noble Lord says that the Treasury should have exercised a little more control in the past. I agree with him. But the control that I desire the Treasury to exercise is not control upon the public, who wish to be as little controlled as may be, but control upon the Government. And where is the evidence of that? What control have they exercised upon the Government, and what control are they exercising now? The noble Lord's speech is the very first I have heard from any member of the Government that appeared to recognise even in the most remote degree that our expenditure had reached such vast limits that unless it was quickly curtailed we might find it extremely 702 difficult to know how the future was to be faced. Even then he did not enforce the absolutely essential moral. He said it was important that people should know what our obligations and debts were, but the real obligation is on the Government, and the real moral is this—that not one single farthing of public money should be spent unless it is absolutely vital in the interests of the nation that the expenditure should be made. You should exercise not merely general benevolent supervisory authority over this expenditure, but should conduct our affairs on what, to use Mr. Gladstone's own phrase, I would call a cheese-paring economy. Everything that can be done should be done to pare down the Estimates to the very lowest. In doing that we should set an example by which the people could say, "At any rate the Government will not spend money because they know that the country cannot afford it, and we ought to imitate them." Instead of that, no such example is set. The absolute opposite is the example set in every direction; and I say with deep and bitter regret that the public are imitating it, and that public and private. extravagance together will make it very difficult indeed for this nation to face the future with success.
§ LORD EMMOTT
My Lords, I do not rise to prolong the debate on its wider or narrower aspects, but to ask a question of the noble Lord who replied on behalf of the Government. I understood him to say, but perhaps I was mistaken, that in a list of obligations that were maturing before the end of March there was as item of £900,000,000 of Treasury bills. The usual amount of Treasury bills that mature week by week, as far as I remember, varies from £50,000,000 to £90,000,000. Is the noble Lord correct in saying that before the end of March as much as £200,000,000 to £300,000,000 are maturing each week?