NATIONAL LOANS BILL. (Hansard, 23 January 1940)

§ Lord TEMPLEMORE

My Lords, you will have in mind that on Wednesday last my right honourable friend the Chancellor of the Exchequer announced that it was proposed to repay on July 1 next the 4½ per cent. Conversion Loan 1940–44. The amount of the loan outstanding is about £350,000,000. The rate of interest is considered high, and the Treasury are taking the first opportunity of repaying it. Incidentally the amount of saving which we reckon will result if the loan is repaid is between £8,000,000 and £9,000,000 a year. At the same time in order to reduce to the minimum the amount of cash to be provided holders have been offered as an alternative to repayment the conversion of their holdings into a new loan at a substantially lower rate of interest. The new loan will carry interest at the rate of 2 per cent. per annum. It will be repaid at par on July 1, 1945, but the Treasury reserve the right to redeem it at par in whole or in part on or after July 1, 1943.

Holders of the 4½ per cent. loan who require repayment in cash will be required to make application to that effect by February 8 next and, following the course adopted on the occasion of 392 earlier conversions, it is proposed to regard any holder who has not applied either for repayment or for conversion by February 8, 1940, as having accepted the offer to convert his holding. In addition to the new loan, the object of such a provision is that the Treasury may know definitely by a certain date the amount of cash that they will have to provide for repayments on July 1. Naturally the Government would only propose such a course if they were satisfied that all possible steps had been taken to ensure that the terms of the loan operation were brought to the attention of the holders of the loan. In this case notices have been sent direct to all registered and inscribed holders, and the Government's offer has received the fullest publicity in the Press. I think the House may be assured that the interests of the holders have thus been safeguarded.

A provision that all holders who do not apply for repayment by February 8, 1940, shall be deemed to have accepted the offer of conversion has, therefore, been embodied in rules which the Treasury have made in connection with this operation under the National Loans Act, 1939. But some doubts have been expressed in certain quarters whether it is effectively covered by those powers and the present Bill has been introduced in order to remove such doubts. The Bill has only one operative clause, divided into two subsections. Under Section 2 (2) of the National Loans Act, 1939, the Treasury have power to make rules with respect to the exchange of securities, and such rules deal for the most part with the manner in which, and the persons by whom, applications for exchange are to be made in various classes of cases.

The first subsection of Clause 1 of the present Bill provides that in connection with any arrangement for the exchange of securities the power of the Treasury to make such rules shall include, and shall be deemed always to have included, power to make provision, first, for requiring holders of old securities who desire repayment to make an application in accordance with the rules, and, secondly, for securing that if no such application is made within such period as may be prescribed by the rules the holder shall be deemed to have accepted the offer of exchange. At the same time the opportunity has been taken to remove doubt about the power of the Treasury to 393 prescribe in the rules the persons by whom applications are to be made in cases where the holder of the old securities has died, and in certain other special cases. This is provided for in subsection (2) of Clause 1. Clause 2 is merely formal. My Lords, the Bill is of a technical character and restricted in scope, but it deals with an important step in the present loan operations. It is, I think, gratifying to note that the proposals of My right honourable friend have received a very sympathetic welcome in another place and in the country, and I hope that your Lordships will approve of the Bill and give it a Second Reading so that it may become law in a very short time from now. I beg to move.