TRUSTEE INVESTMENTS BILL [H.L.]

HL Deb 20 December 1960 vol 227 cc940-63

8.5 p.m.

Amendments reported (according to Order).

Clause 1:

New powers of investment of trustees

1.—

(3) No provision of any Act or instrument relating to the bowers of the trustee which was passed or made before the passing of this Act shall limit the powers conferred by this section, but those powers are exercisable only in so far as a contrary intention is not expressed in any Act or instrument so relating which is passed or made after the passing of this Act.

THE LORD CHANCELLOR (VISCOUNT KILMUIR)moved, in subsection (3), to leave out all words from "provision" down to the first "made" and to substitute: relating to the powers of the trustee contained in any instrument (not being an enactment or an instrument made under an enactment)".

The noble and learned Viscount said: My Lords, if I may have your Lordships' indulgence, I think that it would be convenient if we considered the argument on Amendments Nos. 1, 8, 9, 10 and 11 on the Marshalled List. The effect of the First Amendment would be that subsection (3) of Clause 1 will read: No provision relating to the powers of the trustee contained in any instrument (not being an enactment or an instrument made under an enactment) made before the passing of this Act shall limit the powers conferred by this section, but these powers are exercisable only in so far as a contrary intention is not expressed in any Act or instrument so relating which is passed or made after the passing of this Act".

The object of the Amendment and, as your Lordships will see, of subsequent Amendments is to bring the Bill into line with Acts in which the special position of certain organisations was carefully considered recently by Parliament.

Further examination of the effect of subsection (3) of Clause 1, as it stands unamended, has revealed that the powers given by the Bill would be conferred Inappropriately on certain bodies of trustees. These are bodies whose powers of investment are conferred by an enactment or by an instrument under an enactment.

May I take as an example the investment powers of the Special Investment Departments of the Trustee Savings Banks? They are governed by Section 2 of the First Schedule to the Trustee Savings Bank Act, 1958. These powers of investment are narrower than those authorised by the present Trustee List and are confined almost entirely to Government and Government-guaranteed stocks and colonial stocks. Since this statutory provision was made before the passing of the Bill, subsection (3) of Clause I will override it. Such a widening of the powers of investment of the Special Investment Departments is not appropriate. There are two reasons for that. First, the matter was considered by your Lordships' House a short time ago, and, secondly, in the case of savings banks, their purpose is to maintain capital on a pound for pound basis and they are guaranteed by the Exchequer.

The effect of the Amendment will be to exclude from the overriding consequences of subsection (3) all provisions in enactments or in instruments made under enactments relating to the powers of trustees and to maintain unaltered the present investment powers of such trustees. I have already explained to your Lordships the position with regard to the powers which have been specially looked at by Parliament. That is the position under the first Amendment.

In the case of my noble friend Lord Conesford, who I know was particularly interested in subsection (3) of Clause 3, where the Act is mentioned, I want to say that I carefully considered that point. Your Lordships will remember we discussed subsection (3) of Clause 3 on his Amendment. I want to make clear that Clause 1 (3) deals with pre-Bill instru ments which are narrower than the Bill. Clause 3 (3) deals with a particular kind of pre-Bill instrument which is to be anything wider than the Bill, because considered in terms it would authorise investments and equities without compliance of Clause 2. Both Clause 1 (3) and Clause 3 (3) secure that the trustees will get the Bill powers, subject to the Bill conditions. I mention that in case some noble Lords might be worried.

I go on to Amendments Nos. 8, 9 and 10, which are the Amendments to Clause 6 and are entirely cognate. Your Lordships will see that the effect of the Amendments in Clause 6 would be Where any persons, not being trustees, have a statutory power of making investments which is or includes power

1. (a) to make the like investments as are authorised by section one of the Trustee Act, 1925, or section ten of the Trusts (Scotland) Act, 1921, or
2. (b) to make the like investments as trustees are for the time being by law authorised to make,

however the power is expressed, the foregoing provisions of this Act shall with the necessary modifications apply in relation to them as if they were trustees.

The reason for the change is that as at present drafted Clause 6 would extend the powers conferred by the Bill to bodies other than trustees whose present investment powers are statutorily confined to the full range of authorised trustee investments. But it will also extend the full powers conferred by the Bill to bodies other than trustees whose present investment powers are confined to some but not all of the investments authorised by the Acts of 1921 and 1925. That is achieved by the words, "or any provision of those sections", as appear on page 6, at line 31, in the present draft of the Bill.

The reason for this is that the particular body intended to be covered is the persons authorised to invest the funds of the Duchy of Lancaster. In case any of your Lordships have not immediately in mind the persons who are authorised to invest the funds of the Duchy of Lancaster, I would tell your Lordships that investments shall be made in the names of at least three persons to be named by the Chancellor of the Duchy, and the present three include the Attorney-General of the Duchy, my learned friend Sir Edward Milner Holland. So I do not think your Lordships will have any doubt as to the competence of these persons. I never like using terms which may be a mystery to your Lordships. This body may at present invest only in the securities in paragraph (a) of subsection (1) of Section one of the 1925 Act: that is, United Kingdom Government securities. The Government have agreed that the full powers of the Bill shall be granted. It was considered, however, that any other body with similar powers granted by or under a Statute should be entitled to a similar widening of its investment powers; accordingly the necessary provision was drafted in general terms.

Again, we had a further consideration of the effect of the provision, and it has been found that the extension of the full powers under the Bill to a number of bodies having narrower powers than the present Trustee List would be inappropriate. I have taken the example of savings bank funds. Another example would be building societies. As your Lordships remember, in the case of building societies we examined them very carefully a short time ago, and there we have again the double reason that powers are given by a carefully considered Statute, and there is the same pound for pound basis, and, of course, a need for liquidity.

In order that the matter shall not be left so that those authorised to invest the funds of the Duchy of Lancaster are in a position which no one else can attain, I intend to move a new clause, which is Amendment No. 11, and that fits in with the Amendments which I hope your Lordships will make to subsection (3) of Clause 1 and subsection (1) of Clause 6. These Amendments secure that the powers conferred by the Bill do not apply indiscriminately to persons whose investment powers are less than the powers of trustees. But it may well be that some of these persons could demonstrate the need for wider powers, either in whole or in part, and the purpose of this clause is to permit such powers to be granted in appropriate cases. That names, as your Lordships will see, those authorised to invest the funds of the Duchy of Lancaster. It also empowers the Treasury to specify other persons to whom the clause is to apply. These persons must have their investment powers conferred on them by or under any enactment.

LORD PETRICK-LAWRENCE

My Lords, may I interrupt the noble and learned Viscount? Do I understand that these powers are to be conferred by the Treasury?

THE LORD CHANCELLOR

Yes.

LORD PETHICK-LAWRENCE

Will the decision of the Treasury be absolute or will it be in a form which will be subject to an Affirmative or a Negative Resolution of this House and the other place?

THE LORD CHANCELLOR

I considered that point, because I always consider carefully whether there should be a Parliamentary control. But this is an enabling power which other people in the same position will ask for, and then the Treasury will, in a suitable case, make an order. What is in mind is that people who have not got the powers will ask for the powers, and in a suitable case the Treasury will give them. It was because there were enabling powers that I did not think it a case for the ordinary need for Parliamentary control to apply. That is the position.

I shall be pleased to answer any questions that your Lordships may care to put to me, but I think if you consider all the Amendments together you will see that we have dealt with the special positions like those of trustees of savings banks; we have dealt with those who are not trustees; and we have left the position in such a way that if there is any doubt as to whether persons are trustees or not, they will still have the right to apply to the Treasury. I beg to move.

Amendment moved—

Page 1, line 14, leave out from ("provision") to ("made") in line 15 and insert the said words.—(The Lord Chancellor.)

LORD PETRICK-LAWRENCE

May I ask the Lord Chancellor one further question? Naturally it is a little difficult for any one of us who bears this for the first time to understand precisely what the intention is. What I understand is that there will be certain limited persons who, but for the Amendment that is now being moved, would have been given the same privileges as trustees in general are given by the other clauses of this Bill. But as a result of this Amendment they will not automatically get them. They can, however, apply to the Treasury and the Treasury can decide either to grant or withhold them. But the Treasury cannot in any case give them greater powers than those that this Bill confers upon trustees in general.

THE LORD CHANCELLOR

If I may say so, the noble Lord has got it absolutely right, and I aim sure he will appreciate the reasons. There are people in a special financial position which I described very shortly, but I think it is quite clearly understood.

On Question, Amendment agreed to.

8.22 p.m.

THE LORD CHANCELLOR

My Lords, this Amendment deals with a very short point in Scottislh law. There is a rule of the law of Scotland which is sometimes expressed by saying that a will is deemed to have been made at the date of the testator's death. Although it would be difficult to argue that in the context of subsection (3) of Clause 1 of the Bill "made" falls to be construed in this slightly artificial way, it is desirable that any doubt should be forestalled. The Amendment makes it clear that the reference to the date of the making of an instrument, in the case of a Scottish will, is a reference to the date of its actual execution. The words "testamentary writing" would cover any codicil to the will. This is little more than a drafting point and I beg to move.

Amendment moved—

Page 1, line 19, at end insert "For the purposes of this subsection any rule of the law of Scotland whereby a testamentary writing may be deemed to be made on a date other than that on which it was actually executed shall be disregarded.")—(The Lord Chancellor.)

On Question, Amendment agreed to.

Clause 2 [Restrictions on wider-range investment]:

THE LORD CHANCELLOR

My Lords, Amendments Nos. 3 and 4 can be taken together. Amendment No. 3 is designed to meet the criticism voiced during Committee stage about the inflexibility of the provisions for making payments out of the fund. As at present drafted the Bill requires a trustee to take equal sums from each part of the fund, or, failing that, to make as soon as may be an adjustment between the two parts of the fund. It was repre- sented during Committee that to give effect to this procedure trustees might be forced to sell equities when market conditions happened to be bad. The effect of the Amendment is to allow a trustee to postpone the sale for a period of up to one year. The choice of period is necessarily a somewhat arbitrary one. One year has been chosen because it should be sufficiently long to tide trustees over a temporary bad patch in the market without being so long as to undermine the basic principle of the whole scheme. It is also the same period as that suggested by my noble friend Lord Hawke in his proposed Amendment.

The Amendment works both ways—that is to say, it permits the trustee to postpone sales from either the narrower-range or wider-range part of the fund. It will, however, be of most use to the trustee who wishes to postpone a sale of wider-range investments. The trustee who wishes to avoid a sale of narrower-range investments when market conditions are unsuitable can, in fact, already do so by, for example, selling equities and making a compensating transfer of gilts from the narrower-range to the wider-range part of the fund. But there may be occasions when he will prefer to rely on the provisions of the Amendment. The parenthesis at the end of the Amendment is to deal with the case where the compensating part has depreciated after the taking out. I could give your Lordships an example, but I think it is fairly clear, and unless your Lordships press me on the point I will leave it there and move The Amendment.

Amendment moved—

Page 2, line 38, at end insert ("either(a)").—(The Lord Chancellor.)

LORD HAWKE

My Lords, I am grateful to my noble and learned friend for producing this Amendment, because I feel that this slightly increased flexibility will be of great value to executors and trustees, not only to meet the case of a bad market, but still more when the wider-range part of the fund contains land or shares in a private business. I think it would be in that respect that this twelve months liquidation might be most valuable, and I am very grateful to my noble and learned friend.

On Question, Amendment agreed to.

THE LORD CHANCELLOR

My Lords, I beg to move.

Amendment moved—

Page 2, line 42, at end insert ("or

1. (b) if the amount by which the value of either part of the fund is reduced exceeds the amount provided for by the foregoing paragraph, that within twelve months the amount of the excess is made good to that part of the fund (or is made good as nearly as the value of the property belonging to the other part of the fund permits)").—(The Lord Chancellor.)

On Question, Amendment agreed to.

Clause 5 [Duty of trustees in choosing investments]:

THE LORD CHANCELLOR

My Lords, the clause as drafted requires a trustee to obtain and consider expert advice at such intervals as appear to him appropriate, and in any case at intervals of not more than five years. Your Lordships will remember that on the Committee stage an Amendment was moved by my noble friends Lord Hawke and Lord Polwarth that the period mentioned should be reduced to two years. The Government resisted this Amendment on the ground that the period mentioned was intended to be no more than a long-stop. If, therefore, a two-year period were stipulated, it might come to be regarded as the norm, and many of your Lordships expressed views against that, as I heard. This might be too frequent for some trusts and would certainly be too infrequent for others. During the discussion in Committee there was clearly no unanimity about the appropriate period for this purpose.

In replying to the debate, my noble friend Lord Dundee said [OFFICIAL REPORT, Vol. 227, col. 400]: Possibly the best course might be to omit any mention of a specific period and lay the onus of deciding when to obtain advice fairly and squarely upon the trustees. After all, trustees are not compelled to accept any advice which they get. They are required under the Bill to take advice, without being compelled to accept it. Maybe it would be more reasonable to lay upon trustees the duty of obtaining and considering this advice at such intervals as appear to them to be appropriate, without laying down any period at which they should exercise that duty. This is what the Government Amendment now proposes. By removing any mention of a specific period the difficulties mentioned above are avoided. At the same time the wording of the provision is strengthened by placing more positively on the trustee the duty of determining the intervals at which a review is necessary having regard to all the circumstances, and in particular to the nature of the investments. After the expressions of opinion by many of your Lordships, speaking as trustees, as to the period which you would think right, it clearly is a matter which a good and reasonable trustee should consider very carefully. We thought that it would not only meet your Lordships' views but be the solution of the problem if we placed the duty on the trustees. I beg to move.

Amendment moved—

Page 5, line 44 leave out ("So long as a trustee retains") and insert ("A trustee retaining").—(The Lord Chancellor.)

LORD HAWKE

I think that is probably the wisest course.

On Question, Amendment agreed to.

THE LORD CHANCELLOR

My Lords, this is the other half of the point which I have just been putting to your Lordships.

Amendment moved—

Page 5, line 45, leave out from ("aforesaid") to end of line 2 on page 6 and insert ("shall determine at what intervals the circumstances, and in particular the nature of the investment, make it desirable to obtain such advice as aforesaid, and shall obtain and consider such advice accordingly.")—(The Lord Chancellor.)

On Question, Amendment agreed to.

Clause 6 [Application of Act to persons, other than trustees, having trustee investment powers]:

THE LORD CHANCELLOR

My Lords, this is one of the group of Amendments which I dealt with together, in moving the first Amendment.

Amendment moved—

Page 6, line 27, leave out from ("includes") to ("authorised") in line 29 and insert ("power—

1. (a) to make the like investments as are"). —(The Lord Chancellor.)

On Question Amendment agreed to.

THE LORD CHANCELLORmoved, in subsection (1) (a) to leave out "or any provision of those sections". The noble and learned Viscount said: My Lords, would your Lordships allow me to save a little time by moving this Amendment and the next two Amendments together? If so, I would explain that these are the remainder of the group with which I dealt when moving the first Amendment.

Amendments moved —

Page 6, line 31, leave out ("or any provision of those sections")

Page 6, line 32, leave out paragraph (b) and insert—

1. ("(b) to make the like investments as trustees are for the time being by law authorised to make").

After Clause 6, insert the following new clause:

Application of Act in Special cases

(".—(1) In relation to persons to whom this section applies—

1. (a) subsection (3) of section one shall apply in relation to any Act which was passed or any instrument under an enactment which was made before the passing of this Act as it applies in relation to any other instrument so made;
2. (b) subsection (1) of the foregoing section shall apply where the power of making investments therein mentioned is or includes a power to make some only of the investments mentioned in paragraph (a) or (b) of that subsection.

(2) This section applies to—

1. (a) the persons for the time being authorised to invest funds of the Duchy of Lancaster;
2. (b) any persons specified in an order made by the Treasury by statutory instrument, being persons (whether trustees or not) whose power to make investments is conferred by or under any enactment other than one relating to trustees generally.

(3) An order of the Treasury made under the foregoing subsection may provide that the provisions of sections one to five of this Act (other than the provisions of subsection (3) of section one) shall in their application to any persons specified therein, have effect subject to such exceptions and modifications as may be specified,")—(The Lord Chancellor.)

On Question, Amendments agreed to.

8.32 p.m.

LORD CONESFORDmoved, after Clause 8 to insert the following new clause:

Saving for power of Courts

"Nothing in this Act shall affect the powers or practice of the Court in giving relief under section fifty-seven of the Trustee Act, 1925, or section one of the Variation of Trusts Act, 1958, or cause the Court to grant less freedom in investment than it would have granted if this Act had not been passed."

The noble Lord said: My Lords, I am moving this Amendment to meet the problem to which I drew attention during the debate on the Second Reading of the Bill and subsequently in Committee. It contains, I think, nothing which conflicts in any way with the declared intention of Her Majesty's Government. I would remind your Lordships of one sentence used by my noble friend the Earl of Dundee in reply to me in Committee. He used these words [OFFICIAL REPORT, Vol. 227 (No. 21), col. 283] I agree with my noble friend that there are some trusts in which it might be right to have a larger proportion in equities, and it is not our intention that the practice of the courts should in any way be made uniform or changed or modified by the provisions of this Bill.

My noble and learned friend the Lord Chancellor confirmed this in one or two of his speeches.

I described in my earlier speeches some of the more generous schemes allowed by the court under the Acts which I have cited in my Amendment. My noble and learned friend Lord Cohen thought that I had perhaps exaggerated the freedom of investment in ordinary shares recently allowed by the court, but there is no doubt that in some cases more generous treatment has been given by the court than is allowed by the provisions of the Bill.

Since I heard the speech of my noble and learned friend Lord Cohen, I have refreshed my memory by looking at some of the decided cases. In the case reported inThe Timesof March 14, 1959, very wide new investment powers were given in a case arising under a marriage settlement as recent as 1933, powers which were to apply so long as the bank trustee remained the sole trustee. In that case, Mr. Justice Vaisey made an order permitting investment in any securities quoted on a recognised stock exchange in any part of the world, subject to certain limited exceptions; or in land in England or Wales. The exceptions included certain partly paid shares, shares in companies of less than £500,000 paid-up capital, and Government or local-government securities of any foreign country, except the United States of America, outside the British Commonwealth. Your Lordships will see how wide are the powers that have, in fact, been granted by the courts.

It is clear that if the Government wished there to be no interference with the powers and practice that the courts exercise in this matter, some such Amendment as that which I now move would be required, unless it could be stated that there was no risk whatever of the Bill, without the Amendment, being held by the courts to affect their practice. I do not think that any lawyer would say that there was no such risk. The courts would be very liable to say that they knew from a recent declaration of Parliament the sort of power that it was desirable to give to trustees. Therefore they might well refuse an application for a wider investment clause in the absence of some such Amendment as I am moving. I am therefore moving it because it is desirable to preserve the powers and practice of the court. Her Majesty's Government have themselves said that they do not wish these powers to be interfered with and there is a risk of what the practice would be if there were no such Amendment as this. I therefore beg to move.

Amendment moved—

After Clause 8, insert the said new clause.—(Lord Conesford.)

THE LORD CHANCELLOR

My Lords, I have considered this matter. 1 do not think there is any need to underline the existing powers of the court, and I am not quite happy about the last part of the Amendment where it speaks about causing the court to grant less freedom in investment than it would have granted if this Act had not been passed". However, I am very anxious to meet the point which my noble friend Lord Conesford has put with such clarity, and I will give an undertaking that before the Bill passes to another place I will consult the Judges of the Chancery Division about this matter. If they see no objection to the proposed new clause, even though it is not, strictly speaking, necessary, we will consider moving an Amendment on similar lines. I hope that my noble friend will be satisfied with this undertaking at the moment.

LORD CONESEORD

My Lords, I am most grateful to my noble and learned friend. On that assurance I ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

First Schedule [Manner of Investment]:

PART II

Narrower Range Investments Requiring Advice

LORD CONESFORDmoved, after paragraph 4, to insert: 5. In any bonds issued or guaranteed by the Government of Canada.

The noble Lord said: My Lords, this Amendment seeks to add to the securities permitted in the narrower range any bonds issued or guaranteed by the Government of Canada. Noble Lords may well think that these bonds are so obviously suitable for investment by trustees that I must be wrong in thinking that they are not already included, but I think that that is not the case. Canadian bonds—or nearly all Canadian bonds—are at present excluded by the expression in line 28, on page 9, of the Bill: being securities registered in the United Kingdom".

If my interpretation is right, that excludes the great bulk of Canadian Government securities and all Canadian Government securities that are expressed in Canadian currency. Indeed, I believe that it leaves only one small Canadian Government issue available for trustees under the Bill. That is the Canada 3⅓ per cent. registered stock 1958–63. That, when originally issued, was £10 million, of which I think only some £700,000 is outstanding. Therefore the Bill as it stands virtually prevents trustees from investing their funds in the narrower range in Canadian Government securities. I cannot think that that is reasonable.

Of course, if the Government accept my Amendment so far as it goes, but would prefer it if it were made far wider so as to include, for example, the bonds of the Commonwealth of Australia, needless to say I should have no objection to such an extension. The problem which I have just mentioned does not apply so much in the case of Australia, because, of course, many of the Australian Government securities are available to trustees under the Bill but in the case of Canada they are not. I think it would be very strange indeed if the Government insisted that almost all bonds of the Government of Canada should remain outside the list of narrower-range investments, and I cannot think that they will seriously urge that it may not be an actual advantage that trustees should be able to invest in at least one type of security which is not wholly dependent on one single currency. I beg to move.

Amendment moved—

Page 9, line 32, at end insert the said paragraph.—(Lord Conesford.)

THE LORD CHANCELLOR

My Lords, this Amendment raises a point which may take me a little time to place before your Lordships. I hope your Lordships will grant me the indulgence. The effect of the Amendment, as my noble and learned friend said, would be to enable trustees to invest in Canadian Government or Government-guaranteed bonds issued and registered in Canada or anywhere in the world, provided that payment of interest and repayment of capital were made in sterling. If your Lordships would be good enough to look at the paragraph to which my noble and learned friend has referred, paragraph 4 of Part. II of the First Schedule to the Bill, your Lordships will see that that authorises the trustees to invest in the securities of the Canadian Government as well as of any other Commonwealth Government, provided that they are fixed interest bearing and were issued and registered in the United Kingdom. The Schedule does not, however, authorise securities guaranteed by the Canadian or any other Commonwealth Government, but it may well cover a number of securities guaranteed by Governments, since paragraph 4 also extends to Commonwealth public and local authorities. Your Lordships will see that paragraph 1 of Part IV of the Schedule would further limit the securities to those on which the repayment of principal and payment of interest was in sterling.

I am not sure how far my noble and learned friend has considered the effects of paragraph 1 of Part IV of the First Schedule, but any case I should like Ito put these points to him. Paragraph 4 of Part II of the First Schedule covers the securities of the Canadian Government as well as those of other Commonwealth Governments, and to this extent the Amendment is unnecessary for the type that I have described. To the extent that bonds issued by Commonwealth Governments are prohibited as trustee investments by virtue of the rules about issue and registration in the United Kingdom and about payments in sterling, there is, as my noble and learned friend conceded by the latter part of his case, no defensible ground for singling out Canada as an exception. There is also no ground for authorising exceptionally the bonds guaranteed by the Canadian Government. But if the major point he has in mind is that the limitations about Commonwealth Government stocks having to be issued and registered in the United Kingdom and having to be repaid, and so on, in sterling are too narrow, I would point out that they, of course, apply generally and not only to Canada.

But I should like my noble and learned friend to consider these points. First, paragraph 4 of Part II of the First Schedule is, to all intents and purposes, a modernised version of the power in the present Trustee List authorising trustees to invest in Colonial stocks issued and registered in the United Kingdom by Commonwealth Governments. It is considered that the continued acceptance of these investments, and the extension to securities of Commonwealth public and local authorities is justified, subject to the same limitations as to place of issue and registration. It is not considered that a widening of the scope of overseas investment to include the issue and registration of securities outside the United Kingdom would be reasonable. The requirements as to issue in the United Kingdom and repayments in sterling are necessary safeguards against exchange and transfer risks, and the requirement that securities should be registered in the United Kingdom provides an additional safeguard. If there is no Registrar of the stock within the jurisdiction of the United Kingdom courts it is more difficult for a stockholder to take action in the event of injury to his interests.

I only make the general point that the range of investment authorised by the Sill is very wide, and I do not think the omission will be a very serious loss to trustees. I should be grateful if my noble and learned friend would consider these arguments, and if he still feels they are not compelling to him, if he would be kind enough to write to me I will see that the point is reconsidered by the Treasury and by my right honourable friends who are considering these matters in another place. But at the moment that is our difficulty. I am afraid I cannot accept this Amendment, but I will very willingly look at any arguments he produces against those which I have advanced.

LORD CONESFORD

My Lords, I am grateful to my noble and learned friend for his reply. He is quite right in thinking that I had overlooked the necessity of a consequential Amendment to paragraph 1 of Part IV of the Schedule, and I gladly accept his undertaking to consider the matter further if I write to him and state the case. I also greatly hope that this matter may excite some interest in another place. In those circumstances, I ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

8.50 p.m.

LORD GRANTCHESTERmoved, in paragraph 3, to add to sub-paragraph (a): unless it is carrying on in Great Britain insurance business of a class specified in subsection (1) of section one of the Insurance Companies Act, 1958, and no other business.

The noble Lord said: My Lords, I had hoped that an Amendment in possibly somewhat more general terms on this clause might have been moved during the Committee stage, for as the chairman of an insurance company with a capital of less than £1 million I must declare an interest in this particular Amendment. One million pounds of capital is probably a reasonably satisfactory assessment of status for an industrial company. But standards have very recently been laid down for insurance companies in the Insurance Companies Act, 1958. To introduce a new and different standard in this Bill seems unnecessary and undesirable. A number of companies excluded by this clause as worded feel rather aggrieved. They would be included in the investments authorised in the case referred to by the noble Lord, Lord Conesford. The Refuge, the Britannica and the London and Manchester are examples of companies with less than £1 million of capital, although the assets of these three companies exceed £350 million. This exclusion leaves trustees a very restricted choice in this type of investment. In this Amendment I am suggesting that the safeguards provided by the Act of 1958 are more suitable than the provisions of this Bill. I beg to move.

Amendment moved—

Page 11, line 23, at end insert the said words.—(Lord Grantchester.)

LORD HAWKE

My Lords, would not the simplest thing be to leave the Bill as it is, and for the noble Lord, Lord Grantchester, and his fellow chairmen to make a scrip issue in all those cases to bring their capital up to £1 million?

THE LORD CHANCELLOR

My Lords, the effect of the Amendment would would be that insurance companies, whether established in Great Britain or outside, doing most kinds of insurance business within Great Britain would escape from the limitation on investment to which my noble friend Lord Granchester referred. The noble Lord has argued that insurance companies are in a special position which makes the application of the rule unnecessary. Of course, I concede at once that insurance companies are subject to considerable public control under the Insurance Companies Act. But I would ask my noble friend to consider these points.

Whilst it is true that insurance companies are subject to greater public control than companies in general, and that their paid-up capital is often relatively small, does this of itself entitle insurance companies as a class to exemption from the general rule governing a minimum issued and paid up share capital? I do not think so, because the purpose of the rule is to set a standard whereby a trustee should invest only in companies whose shares have a sufficiently large market to command a representative price. This applies to insurance companies as much as any other.

Furthermore, the acceptance of exemption of one class of companies from the general rule because they can be shown to have special characteristics could, and probably would, lead to claims by others on similar or on other grounds. The range of investments authorised by the Bill is very wide. While it may be true that the securities of insurance companies which do not conform to the general rule might make suitable investments, a trustee will not be seriously at a loss through their omission.

There are other considerations which I am sure will occur to your Lordships. Your Lordships will see the words at the end of the Amendment: "and no other business". Obviously, that might include some and exclude others who would not be desirable in those circumstances. But on the general point that I have put to your Lordships, that the object here is that a trustee should invest only in companies whose shares have a sufficiently large market to command a representative price, I respectfully suggest to my noble friend that this would not be a suitable breach in that position when one considers the whole range of trustees. Therefore, I would ask him not to press the Amendment.

LORD GRANTCHESTER

I do not wish to press the Amendment.

Amendment, by leave, withdrawn.

Second Schedule [Minor and consequential amendments]:

Third Schedule [Repeals]:

THE LORD CHANCELLOR

My Lords, if I may take Amendments Nos. 15 and 16 together, I would say that Amendment No. 15 is a drafting Amendment and Amendment No. 16 is a consequential Amendment. Perhaps your Lordships would allow me to move them both together. I beg to move these Amendments.

Amendments moved—

Page 13, line 1, leave out from beginning to second ("the") and insert ("for the words from 'stocks' to the end there shall be substituted ")

Page 14, leave out lines 30 to 32.—(The Lord Chancellor.)

On Question Amendments agreed to.

Then, Standing Order No. 41 having been suspended (pursuant to the Resolution of December 15):

8.58 p.m.

THE LORD CHANCELLOR

My Lords, I now come to move the Third Reading of this Bill. The speediest glance round the House convinces me that the most popular way would be to deal with it formally. I had prepared a speech, I am afraid of some length, which dealt with the various points raised on the Committee stage. I am entirely in your Lordships' hands. I am quite prepared to give an undertaking that I will write to noble Lords who have raised the various points and deal with the points by correspondence. On the other hand, if any of your Lordships feel that I ought to deal with them publicly I will do it. Unless anyone rises and desires me to deal with them publicly I shall move the Third Reading formally. Of course, if any one raises any point then I will answer it. My Lords, I beg to move that the Bill be now read a third time.

Moved, That the Bill be now read 3^a. —(The Lord Chancellor.)

8.59 p.m.

LORD PETHICK-LAWRENCE

My Lords, I feel that I cannot allow this Bill to pass from this House without saying just a few words, and I shall not be quite so self-denying as the noble and learned Viscount was in moving the Third Reading. I personally support, and have supported from the beginning, this Bill. I think lit is highly desirable that trustees should not be so limited as they have been in days gone by, hut probably there is a good deal of misapprehension in the country as to what this Bill does or does not do.

Trusts that have been already so ordered from the beginning that the trusteees can invest their money as they desire will not get any additional privileges under this Bill. Those persons who make wills in future will not be very seriously diverted by the course of this Bill, because it will still be possible, after the passing of this Bill, for any testator or person giving money on trust to put in the instrument a clause confining the securities which can be used for the investment of the trust in any way he likes, irrespective of any proposals that are made in this Bill. And this Bill will not change his disposition in consequence, because the Bill applies only to persons who have made those restrictions in times gone by. On the other hand, a person can in future, as in the past, say simply that he leaves it on trust; and then, of course, the clauses of the Bill will operate in his case.

Now how far are people likely to make use of these provisions? I believe that there again there is considerable doubt. Some people think it would be very much better to have money in equities than in gilt-edged securities; and provided they have already got money in equities it may be a very good thing. But trustees and other persons should think very carefully about whether at this particular junction it is suitable or desirable that they should attempt to shift their property from gilt-edged securities, as it may be in at the present time, to some equities which they may think will render a better account of themselves in the remote future or even in the early future. That is a question not for me or for us here in this House, but for the advisers and stockbrokers who will see fit to advise people as to what they should do. It may well he (and it appears very likely to me) that it will be some time before it will be advisable for trustees to make any considerable change; but that, as I say, is a matter for others than ourselves to consider.

I should like to make one or two observations on the prospects. The noble and learned Lord, Lord Conesford, whose speeches have been very interesting, took the view that it was—I do not know that he went as far as to say "probable", but he seemed to think it was likely that trustee securities would go down even lower than they are at present, and that they would be of little value to a trust, partly because of the likelihood of their low market value, in terms of Stock Exchange values, and partly because of the possibility of inflation continuing for many years to come. I was reading only the other day a very interesting brochure in some financial magazine which pointed out that although it is quite true that over a period of history prices have tended to rise, looking back over the last 400 or 500 years there have been quite long periods when prices tended to fall. I can well remember that in the first thirty years of my life deflation persisted throughout nearly the whole of the period; so although it is quite true that in the long run prices will probably go up, it does not at all follow that in the short run that will be the case.

I turn now from considering these matters from the point of view of the trustee and the advantage for his beneficiaries, and wish to consider the position of other persons who have been invited, cajoled and prompted by patriotic reasons to invest in gilt-edged securities in years gone by. Here I think the Government have a very considerable responsibility. First of all, they have brought about, largely through their decisions, considerable falls in the level of gilt-edged stocks. By creating a high bank rate, by making other restrictions and by practically compelling the banks to sell large masses of gilt-edged securities they have steadily depressed the value of Government funds. That is one thing. In the second place, in this Bill they are changing the basis upon which people were invited to invest. In days gone by people were invited to invest on financial grounds, taking into account the fact that all trustees, unless otherwise specified, had to invest in gilt-edged stocks. The Government have now, to the partial extent that is provided in this Bill, got rid of that proviso which was one of the inducements held out to investors to invest their money in gilt-edged stock.

I consider that unless Her Majesty's Government take some other step in order partially to counteract that effect they are guilty of a breach of trust with investors, many of whom are quite poor people who invested their money in good faith, on patriotic grounds, and find themselves left in the lurch at the present time. I have made certain suggestions at various times, all of which have been rejected by Her Majesty's Government. But it seems to me that, even if the long-dated stocks will ultimately recover from their present low market value, the one class of Government securities which does not conform to that pattern is the undated stocks. I hold, therefore, that the only just attitude towards patriotic investors in undated stocks is that the Government should fix some date in the future, say the year 2000, or even possibly later than that, at which these stocks should be redeemable at par. I do not think that would affect the present position. It would not involve the Government in any substantial money for the present and it might enable them to float a loan at a cheap rate in the future. But it would give some recompense to patriotic investors who have been let down by the Government.

Having said that, I do not propose to add anything else. I return to the view that the Bill is, on the whole, a good one—in spite of what the noble Lord, Lord Conesford, said about only half of the trust investments coming under the changed provisions in the Bill. But I believe the Government owe it to investors to take some steps to counteract the injurious effect that this Bill and other actions of the Government have had and are having on the price of securities.

9.10 p.m.

LORD CONESFORD

My Lords, I will detain the House for only a few minutes, chiefly because of the mention of my name by the noble Lord, Lord Pethick-Lawrence. I would assure him that in my objection to half the trust funds at the time of the division being held perpetually in fixed-interest bearing securities, I was not thinking only of Government securities; nor do I fear that there may be a further drop in their value at the present time. In fact, I said in one of my speeches in Committee that, if I could persuade my fellow trustees in any trust of which I was a trustee and which had funds available for investment at the present moment, I should undoubtedly purchase a British Government security standing well below par and due to be repaid at par in a few years time. My fear was and is a quite different one. I am not considering what the noble Lord himself just referred to as the present juncture; I am thinking of what may happen in the next 36 years: and 36 years have passed since we last had a Bill of this type setting out what trustees could invest in.

I do not take the view (and I doubt whether the noble Lord does) that in the course of the next 36 years there is no prospect whatever of sterling ever being in danger. I say that, if such a time ever arrived, trustees should not be precluded from taking the desirable action in the interest of the beneficiaries and the trust fund which all their advisers would tell them they ought to take, if they had the legal power. That was my criticism.

If a persistent critic of this Bill can make one final plea, I should like to make it. I shall not repeat any of the criticisms I-made on Second Reading or at the Committee stage. I would only say that that I know from conversations with men with the highest qualifications and business experience that my apprehensions are quite widely shared outside Parliament. Although I welcome this Bill in the sense that it is certainly better than nothing. I do not believe that the Bill in its present form will bring the relief to small trusts that the Government desire, or that it will prove easily workable. I do not believe that it will be easy to find trustees able and willing to undertake the duties of trusteeship of the very settlements that the Government most desire to help. I would remind the noble Lord who has just spoken that, of course, the main settlements, the trustees of which it is desired to help, are ancient settlements where the settlor has long been dead. I would beg Her Majesty's Government, therefore, to consult some of the immensely experienced bodies which have expert knowledge of these matters; and, after such consultation, I would urge them themselves to table Amendments in another place or listen sympathetically to those that may be put forward.

9.14 p.m.

THE LORD CHANCELLOR

My Lords, I am grateful to the noble Lord, Lord Pethick-Lawrence, and to my noble and learned friend Lord Conesford for what they have said. Some day, when I am considered fit to speak in a financial debate, which has not so far occurred to me during my 26 years in Parliament, I should very much like to debate with the noble Lord, Lord Pethiek-Lawrence, on the question of the use of bank rate and on the other questions which he put forward with such feeling and sincerity about the position of investors in non-dated stocks. But I think that your Lordships who are here would not regard to-night as perhaps the appropriate occasion for me to plunge for the first time into these financial seas.

I would only say this on his second point—which was that even by introducing this Bill, which he concedes is necessary, we have encouraged a process which he thinks is not healthy—that, of course, the difficulty of the change from the one class of investments to the other was a matter which every Government and, as an old Treasury Minister he will realise, the Treasury had in mind. But the broad answer is that it had come to a position when one had to consider it, certainly from the point of view of the beneficiary under the trust, and the person who is getting the income, but also from the point of view of the peace of mind of trustees regarding the remainder of the capital in trust. My noble and learned friend Lord Conesford has put the other point of view with great force and sincerity: that it is not fair to trustees not to give them an absolutely free hand. The answer to that, which he himself made in the Committee stage, is that the Bill certainly improves the position enormously, and of course it gives them that free hand as to half the investment and it also gives them a freer, if still tied, hand with regard to the other half.

I would conclude on only this note. I am quite sure (and here, with respect, I join issue with my noble and learned friend) that, on the whole, there are thousands of trustees, and probably hundreds of thousands of beneficiaries, who are really grateful to the Government for having introduced this Bill. And, my Lords, there are very few people who regret its introduction. Again, in the course of the last quarter of a century that is a fate which has befallen very few Bills which I have seen introduced into Parliament by any Party in the State. I do not want to make extravagant claims, but I am sure that that is a claim which I can make without fear of contradiction. As I said, on the other points, including the point of the noble Lord, Lord Pethick-Lawrence, on value (it is market value, but I shall write to him because he raised the point), I will write to noble Lords, if I may. Without taking up more of your Lordships' time, I will ask your Lordships to allow this Bill now to be read a third time.

On Question, Bill read 3^a, and passed, and sent to the Commons.