HL Deb 13 November 1969 vol 305 cc798-816

5.5 p.m.


My Lords, this must be one of the shortest Bills ever to be presented to this House. It is also a very simple Bill, and I think I am entitled to say that it has some very obvious merits. But it is not acceptable to everybody. I raised this subject once in another place, in the form of an Amendment to the Trustee Investments Act 1961, and once here on an Unstarred Question on May 6, 1968. As a result of that Unstarred Question I have some idea of what the Government's attitude may be. This is the purport of the Bill. The Trustee Investments Act was introduced by a Tory Government because it was felt that the law about trustees was too stringent as regards our choice of investments. Both Parties are equally responsible for what has happened. Before that, the National Insurance Act 1946 had provided that there should be two funds: a National Insurance Fund into which all the contributions would go and out of which benefits and so on would be paid, and a National Insurance (Reserve) Fund which was to stand behind that but equally was to be financed out of money that had its origin in contributions to the National Insurance Fund. This was soon after the War, when I think we all had rather a higher opinion than perhaps we have now of the safety of gilt-edged securities as a means of investment. The other clauses have been re-enacted in the recent Act on the same subject and in the same form.

The result of these two measures was that as regards the National Insurance Funds the hands of the National Debt Commissioners—to whom I will refer in a moment—were tied tightly. They could invest only in savings banks securities —that is to say, in effect, in Government stock, and not even in municipal stock. The hands of the private trustee were free to a certain extent—but only to a certain extent—and, subject always to the original instrument of trust, he was allowed to invest in a variety of things that I need not go into but with which many of us will be acquainted because we have had to work the thing. There were securities which required approval, and other securities which could have half the fund, and so on. The net result is that the two funds were tightly restricted and the private trustee at the same time had his hands partially free.

A certain Member of the Government —I do not think I will repeat the name—took part with me in Committee on the 1961 Bill. The last time I raised this subject I said some things that I think went too far. I have since been thinking about it, and I have come to the conclusion that Members of either House of Parliament are, of course, entitled to change their minds; and if they do change their minds over anything they cannot be both consistent and honest. That particular Member chose to be honest and inconsistent. I think he was right, and I do not think I ought to tax him with his inconsistency. With that exception I am not going to mention a soul in this case.

But I am going to say some rather critical things about the Treasury. I want to make it perfectly clear that I am talking about the Treasury as an institution. None of the various successive Ministers has done what I think he ought to have done, and the civil servants concerned have of course done their duty properly. There is therefore, so far as I can see, no Party point whatever in this matter, and there is certainly no personal one. The whole point is: ought the National Debt Commissioners, or ought they not, to have the powers of investment of a private trustee? If this Bill were passed they would be given those powers. There has been a little discussion about a drafting point but it is only a drafting point. I think I am right, but it does not matter, at this stage at any rate.

Taking the Bill as that and with that effect, I ask, why does anybody oppose it? It seems at first sight to be horse sense and one sees no reason why anyone should oppose it. It does not oblige anybody to use these powers in the least. The question whether they should be used at all, and if so when, how and to what extent, is all left completely at large and at the discretion of the National Debt Commissioners. My Lords, let us just deal with that slightly absurd body. The National Debt Commissioners operate under an Act of 1818. They were constituted earlier, but by that Act any three of them are allowed to do the business of the Commissioners as a whole, and the operative three—there is no doubt or denial about this—are the Chancellor of the Exchequer and the Governor and the Deputy Governor of the Bank. If your Lordships can distinguish them you are doing something which those who write our Statutes succeeded in doing, but that seems to me to have no reality whatsoever; and therefore I regard the National Debt Commissioners as identical with the Treasury.

They have an office in the City and they share it with the Public Works Loan Commissioners. When you try to find out who they are, there is an extraordinary silence in all the ordinary books of evidence. They have this peculiarity: that if the Lord Chief Justice, for instance, who is one of them, wanted to resign, so far as I can see he could not do so except by ceasing to be Lord Chief Justice or getting an Act passed to remove him. They last met in 1860 under the chairmanship of Mr. Gladstone. I can imagine —but I am not going to take up the time of the House in discussing it—the kind of thing that Mr. Gladstone may have said to them. They had been set up to reduce the National Debt and obviously they had failed to do so; and I should think that Mr. Gladstone used some quite strong language about them and then went away and saved a few more candle-ends himself. There it was, at any rate, and there they are; one of the absurdities of the British Constitution—which contains quite a lot.

I have given your Lordships the early history. The next thing, and this I think is very nearly all I need mention by way of history, is this. It has recently transpired in connection with other proceedings —which are the subject of a Bill in the other House and therefore I cannot go into them—that about 1957 the Treasury was thinking of doing something, not about this particular Bill but about a point remarkably like it. This happened, too, at the same time as the Radcliffe Committee on the management of the monetary system. The Radcliffe Committee asked the Treasury witnesses some questions—rather awkward questions but very few of them. I referred to them when this matter was under discussion in May, 1968, and I shall not do so again. I think that the position was fairly summarised by my noble friend Lord Beswick who, I understand, is going to reply. What the Treasury witnesses did, he said, was to put up two sets of considerations which the Treasury ought to take in mind in investing these funds. One was the interest of the contributors and the other was the general national interest.

I am a little critical of that statement and I will return to it in a moment. But we are dealing with very large sums of money—£1,100 million or £1,200 million, invested in securities which are now worth between £800 million and £900 million. The loss of them—a paper loss, I agree, until they are realised—is a matter of £350 million. My Lords, £80 million has actually been lost by realisations. All this is the result, not of any stupidity of the Treasury—I would not have the impertinence to suggest that; it is the result, as I see it, of the two clauses, in the 1946 Act and now in more recent legislation, which obliges them to buy gilt-edged securities. They put the short-dated ones, quite naturally and properly, into the Insurance Fund, which is much smaller, and they keep the long-dated ones in the National Insurance (Reserve) Fund. It does seem a staggering amount of irredeemable and long-dated securities, and it is not altogether surprising that more than one-third of it has disappeared in the course of years. My noble friend will no doubt correct me if I am wrong, but I am not sure that the detail of these figures matters. The point is that what has happened is what nowadays one can be pretty certain will happen if you tie up a lot of money in long-dated gilt-edged securities; they depreciate a lot. I think I mentioned £80 million, but if I did not I say it now; a figure of £80 million is given as actual losses on realisation. They have kept many of the more difficult groups of securities on which there are far larger paper losses.

My Lords, I find this rather a staggering figure and I find the whole business extremely puzzling. The last time this matter was discussed my noble friend did two things which, if I had answered him —I was not then going to take up the time of the House—I should rather have objected to. I hope that he will not do them again. The first point is this. There really is a point in giving powers in a case like this without trying to tell people whether or when to use them. The point is a simple one. I am sure that I know much less about it than the Treasury do and it is much better to leave it to them to judge. Why do they object to being given powers without any obligation about using them? My Lords, I am afraid I can guess the answer. When a Government Department takes this line, even if it be the Treasury, it is because powers will carry responsibilities; and these powers would carry responsibilities, there is no doubt about it. The Treasury would have to think about it, whether or not in fact they ought to keep this amount of contributors' money in this form and where are they going to stop.

I do not know what is going to happen to the gilt-edged market and I am sure that they do not either. We are told that it is to prop up the gilt-edged market and the national finances. All I can say is that the gilt-edged market has been dropping steadily and it is far lower now than it was when the clauses were introduced in 1946 when the Government of the day could borrow at 3 per cent. Now the Government have to pay 9 per cent. to borrow and I cannot tell if it is going to stop or not. But to tie the hands of the Department seems to me to be quite wrong. Then it is said that they want to do this to support the gilt-edged market. My Lords, there is another point about that, and this is the one that really troubles me; I do not know whether it troubles my noble friend or not. I think it is immoral to get contributions on what Minister after Minister has said was a contributory scheme and then, when you come to invest them, to do so in such a way that you rank the general management of the monetary system with the benefit to contributors. If I wanted anything out of the National Insurance Fund I should regard it as rather a poor excuse if I could not have it because at the moment it was engaged in propping up Consols. I cannot think that that is right.

This moral dilemma has led me into the most awful difficulties. I got into the Treasury the other day—I had never been there in my life—and I went down a long corridor with a lot of doors. There was no indication as to what was behind the doors and I wondered which of the rooms contained the Consolidated Fund. I had forgotten to bring a wheelbarrow; obviously I would have needed one— "pinching" on a small scale would probably have had no effect, except that I might have got into a lunatic asylum or prison; but if it were done on a large enough scale a case could be made out for it. What has been happening here, so far as I know, is that the Treasury—and I am referring to the institution and not to any particular people—is misappropriating contributions in order to try to prop up the national monetary position, and it is making an awful mess of it. I should like my noble friend to explain to me what difference it would have made if they had invested this money in some other way. I need not go into details because I am not here to advertise stockbrokers. But it puzzles me.

What would happen? This Fund is rarely used because it has a sizeable National Insurance Fund in front of it in constant use, and if there was such a mess of the finances of National Insurance that there had to be Parliamentary intervention, the Minister would explain. He may or may not ask to draw on the Reserve funds, but he is just as fully entitled to get Parliamentary sanction to draw on the Consolidated Fund.

After this fiction about the wheelbarrow, I came to the conclusion that there were grave doubts about the existence of the Consolidated Fund; that there probably was not such a thing— it was a book entry somewhere or other. But if this had been a book entry not so much money would have been lost. I do not quite see what purpose this Fund is serving. I must not go on any further because it is beyond the scope of what I am putting forward as a Bill, and I must try not to be a crashing bore, as one can be on a thing of this kind. If there is the Consolidated Fund behind us, as there must be, is this not exactly like the case which the Public Accounts Committee had before them a month or two ago, in which one Tory Member (no names, no pack drill) at the end of the day said that there was no use in having that fund—he was talking about an insolvency fund—when the Consolidated Fund was there all the time. That may be a solution; I do not know. But I feel strongly that to misappropriate contributors' money in the way it is being misappropriated here is morally wrong. I know that my noble friend Lord Beswick will not agree, but I feel no doubt about it myself.

This is a case in which Parliament ought to intervene. One cannot do much with a Private Member's Bill, but this is one form of intervention. There may be a better one. We cannot go on like this, holding these securities on a falling market, because we are obliged to do so by a Statute passed over twenty years ago at the end of the War. We cannot go on holding them and nothing else. It is too silly for words.

I would recall one other thing to your Lordships' attention. The Treasury began thinking about this matter in 1957. They have taken about 12 years to make up their minds. They stoutly assert that they have been thinking about it all the time. I made some inquiries. The longest period of gestation of any living creature is that of the elephant, which takes 19 to 21 months. That is nothing to the Treasury. I tried to find out about dinosaurs because I thought that there was some resemblance between dinosaurs and the Treasury. Unfortunately, we do not know enough about dinosaurs; but such evidence as there is shows that the dinosaur's period of gestation is comparatively short. They are probably beaten by the elephant; they are certainly beaten by the Treasury.

I understand that the Treasury got so far as to draft a Bill. I do not know what they did with it, but they have it somewhere. Their answer, given in evidence before the Public Accounts Committee, is that they never got a Government to take it up. I daresay that is true; it is the sort of idiotic thing that does happen. But it is idiotic and it has its human repercussions. When we come to consider what benefits are to be given or contributions to be levied, the existence of this Fund has a certain importance. I should like to see some action taken to avoid its being misused in the way I think it is being misused at present. I hope I have kept my moving of this Bill short. I have tried to. It is certainly a frightfully dry subject, but I have been living with it for a long time and thinking about it, and I still think that the present state of affairs is wrong. I beg to move.

Moved, That the Bill be now read 2a. —(Lord Mitchison.)

5.17 p.m.


My Lords, my noble friend Lord Mitchison has put forward his argument with his eyes twinkling and made us all laugh, but all the same he deployed his argument in favour of the Bill in a very logical way. My noble friend put forward a plea for what seems to me to be an almost unanswerable case. It is the permissive character of this Bill which appeals to me and which I find so effective, and in our permissive age perhaps this might not be so inappropriate. The Bill places no compulsion upon the National Debt Commissioners or upon the Treasury or their advisers. It merely provides the opportunity, at present denied to them, for the same freedom of action as others have. In other words, if the Bill becomes an Act, it will allow them to employ their common sense.

Looking back at almost 35 years in the City, until retiring at the end of last month, I think the thing that helped me most in offering advice to trustees and other investors was the advent of the 1961 Trustee Investments Act, and credit must be given to the Conservative Government at that time for finding time to allow for its passage through Parliament. I will always associate that Act with an old friend of mine and of my father, the late Lord Nathan. He had great wisdom in these matters and the Act was very much his baby. It began as a permissive Act. There was no compulsion, but it enabled one to use one's judgment and experience and made it possible to recover lost capital values for many trustees and investors.

It is argued, as my noble friend Lord Mitchison has said, that if one gave the National Debt Commissioners these powers there would be no support for the gilt-edged market. But I do not think there is very much in this proposition. In the first place, I doubt whether any noble Lord would disagree with me when I say that I think the gilt-edged market has already reached a pretty base level; and secondly, it is not by any means always a good time to go into the equity market. There are many opportunities for profitable excursions into the gilt-edged market, especially since the Chancellor of the Exchequer, in his infinite wisdom, had the foresight to remove the inhibiting and long-term capital gains tax from the field of gilt-edged investments in the last Budget, thus freeing the market and restoring a degree of activity not seen since the introduction of this unpopular form of taxation by a Conservative Chancellor of the Exchequer some few years ago. If the present Chancellor of the Exchequer is looking for suggestions, I would invite him to remove the short-term gains tax from the gilt-edged market, too. That would indeed have a dramatic effect upon values.

It is worth remembering that in 1934, when I began work in the City, 3½ per cent. War Loan stood at 109, and 2½per cent Consols stood at about 94. So the late Mr. Dalton should not get all the blame for failure to maintain a cheap money policy. What I am trying to say is that the advisers to the Trustees should use their judgment in applying the Act, bearing in mind the timing and prospects of their transactions. It is not a question of creeping nationalisation, though this may be a fear in some quarters. The State has many equity holdings already. It holds 50 per cent. of the British Petroleum Company, to say nothing of the shipbuilding investments, for which everybody is profoundly grateful. I hope that the Government will not block this Bill. It deserves a better fate than that, in my opinion. It will do no harm, and might do more good than even my noble friend Lord Mitchison expects.

5.22 p.m.


My Lords, I had not even seen Lord Mitchison's Bill until I came into your Lordships' House to-day and took it out of the pigeon hole in the Prince's Chamber. It immediately interested me very much, and listening to the speeches of the noble Lord is always a pleasure. I do not think it is for me to try to expound how the Government keep their accounts of these various funds; it is very complicated, and some of the funds are not quite as solid as the noble Lord might imagine; they are more likely to be in two dimensions on a sheet of paper. But I think I can safely leave that point to the noble Lord, Lord Beswick.

What interests me is the moral point raised by the noble Lord. If there is a moral point here, I think it goes much further back. The real point is that we ought to strive harder than we are doing to keep prices stable. The result of the long frittering away of the value of our money is that all classes of people are beginning to lose confidence in money as a store of value. In my view, this is very serious. I was surprised the other day when my noble friend Lord Amory, in making an excellent speech in the debate on the gracious Speech, said that there were three objects of Government —first, the balance of payments; secondly, full employment; and thirdly, stable prices—and that nobody had been able to get all three together. But he thought that if he had to give priority to one object it would be the balance of payments. It appears to me that if prices were kept stable we would not have to worry about the balance of payments, and that keeping prices stable is the priority object of a civilised economic policy.

I think it is very serious when the Government themselves are encouraging people to lose confidence in their own paper—in national gilt-edged securities—and to go over into ordinary shares. The noble Lord, Lord Mitchison, said that in the evidence tendered to the Radcliffe Commission by the Treasury they said that when they invested these funds one of the considerations was that their policy should be in the national interest. To knock your own market in the national interest—which would be the effect of diverting funds invested in Government securities into ordinary shares—is a very doubtful proposition. My own view is that the continuing fall in Government securities is something that we ought to worry about much more than we do. Naturally, there is no cure for this except confidence that prices will remain more stable than they have done in the past. That is the way to protect the contributor. It is not only the contributor to the insurance fund that we have to protect, but all people who in some way or other make provision for themselves, their families and their future in money terms. Even if you take out an insurance policy and insure your life for a certain sum of money you make a contract, and when that money comes to be paid, whether you are still alive or not, it may buy much less, and what you thought was security is not security.

I think this is the fundamental problem. Whether it is to be put into a class of moral problems or not I leave to your Lordships to decide, but it is something to which we should pay attention. We ought not to encourage people to feel that the only way of preserving their stake in the country is to have something that will go up when money goes down. Therefore, I am not in favour of this Bill on fundamental grounds. I think it could be shown to be not quite as useful as the noble Lord thinks it would be if the noble Lord who is to reply gave a short survey of how the Government keep their accounts.

5.27 p.m.


My Lords, I rise merely to indicate that the view on this side of the House is not necessarily that of my noble friends Lord Mitchison and Lord Addison. There is another point of view, and I should like to express it, although I fear that most of the wind has been taken out of my sails by the noble Viscount, Lord Eccles. This is really a non-Panty question, because Governments of both complexions have been investing insurance money in this manner for many years past. My noble friend Lord Mitchison said that this is the third time that he has raised the question. I hope that it will be third time unlucky, as it was unlucky on the first and second occasions.

My noble friend has given us an interesting historical review of national finance and national debt finance. I wish that he had told us exactly what Gladstone did say in 1860, because many of us have been waiting for years to know what it was. But we are not concerned with Gladstone. We are concerned with the conditions that exist to-day, with the fluctuating and sometimes unsound monetary policies as they exist all over the world. Naturally, equity investment has some attractions. For a number of years I had executive responsibility of investing for a big county council; and I am to-day the treasurer of a university, where I similarly have responsibility for investment. Under the latitude that has been allowed by the Trustee Act 1961, one puts a fair amount of one's money into equities. But one must not be blindfold and one must realise that equities have a habit of going down as well as going up, as we have seen over the last six to eight months.

I think the basic question here is whether we should use this Government money—because it is Government money, although it has been contributed by the people under legislation which requires them to do so—to give support to the gilt-edged market whenever it is felt that this is necessary; and the Government would be lacking in their duty if they did not make use of the funds in their possession to give that support. I know it can be argued that the gilt-edged market should be able to support itself if the national economy is on a sufficiently sound basis. But at the moment, and for some years past, we have had fluctuating monetary conditions throughout the whole world. It is not surprising if the gilt-edged market is probably not able to sustain itself without outside help. If the insurance fund were found to be suffering very severely because of the way in which this money was invested, it would be upon the Exchequer to make a supplementary grant to that fund. It might be a pity if it were found to be needed in that way, but to make a grant of that kind would not be so serious a matter as would be the withdrawal of the support which remains ready to come to the aid of the gilt-edged market.


My Lords, I wonder whether I may ask the noble Lord, Lord Beswick, one question before he speaks. It concerns a matter with which I hope he will deal—indeed I feel certain that he will deal with it. I should like to know about something which both noble Lords on the other side have mentioned. As I understand it, there are in the National Insurance (Reserve) Fund two sides: first, funds which were taken over from the old Fund, and, secondly, funds which represented the Government's contributions, the Government's counterpart largely, in the early stages of the National Insurance Fund. This has some real importance. If I remember correctly, it was not a question of the contribution of National Insurance contributors being taken and put into this Reserve Fund, because that went into the National Insurance Fund. It was the necessity, a statutory necessity, at the time for the Government to make contributions to the Fund. The contributions they were to make to the Fund were calculated on a much higher rate of unemployment than actually proved to be the case after the war. So one had this surplus arising. I am asking this question purely because I do not think it right that this can really be said to have arisen from the contributions of the National Insurance contributors. It was always Government money that was paid into this Fund, because it was their statutory duty to pay it into the Fund.

5.33 p.m.


My Lords, my noble friend Lord Mitchison, has introduced his Bill (as we all thought he would) in a most attractive and very good-humoured way. We have had a quite fascinating discussion, and a discussion on this topic of money cannot fail to be fascinating. Looking around the Chamber, seeing the expression on some of the faces of the noble Lords, as they discussed the prospects for the gilt-edged and equity market, was quite an interesting exercise.

The purpose of the Bill, aside from some of the wider discussions we have had— and I shall not be expected to pursue all that has been said—is to give the National Debt Commissioners the powers to invest which are conferred by Sections 1 to 6 of the Trustee Investments Act. This goes a good deal beyond the scope of what I understood my noble friend originally suggested in relation to the National Insurance (Reserve) Fund. The Bill we are now considering would seem to cover the whole powers of the Commissioners, and to extend, for example, to the investment of savings bank funds. Even assuming that the objectives of my noble friend were acceptable, it is open to very considerable doubt whether modification of the Trustee Investments Act is the correct way to achieve what he sets out to do. The Trustee Investments Act, as my noble friend Lord Addison will agree (and I should like to join with him in the tribute he paid to the late Lord Nathan), is basically designed to ensure the proper management of funds by the least skilled of trustees. It would not seem to be appropriate to use this Act in connection with the National Debt Commission, the active members of which (and despite the difficulty which my noble friend Lord Mitchison has, as he goes down the corridors of the Treasury) are the Chancellor of the Exchequer, the Governor of the Bank of England and the Deputy Governor of the Bank of England. I would hardly have said that these were the least skilled of trustees.

Moreover, although the largest funds for which the Commissioners are responsible are the Insurance Funds and the deposits of the Ordinary Departments of the National Savings Banks and the Trustee Savings Bank, there are in addition several smaller funds which would be affected. All have their investment policy carefully defined, either by statute or by regulation. If amendment was required to any one, or even all, of these funds, it should be done in a much more specific way than by this Bill. I am submitting that it would be inadvisable to allow this Bill to get on to the Statute Book because its form—quite apart from any other argument—is quite clearly unsuitable for its purpose. But I realise that my noble friend would wish the purpose of the Bill to be considered, even though the Bill itself was unacceptable.

My Lords, I answered a good many of my noble friend's misconceptions when we had a discussion on May 6, 1968, and I do not want to go over all the ground again. But I must re-emphasise the point that those contributing to the pensions and other insurance schemes have not suffered at all by reason of the funds being invested in gilts. I quite understand my noble friend's concern about pensions, pensioners and pension funds. Of course their interests must be protected. But public sector funds are quite different in purpose and character from private sector pension and insurance funds. The fact that the National Insurance Funds have been invested in gilt-edged securities makes no difference, one way or other, to the level of pensions or other benefits. The level of these, as my noble friend Lord Leatherland said, is determined by the Government of the day in the light of considerations quite different from the income earned by any investments. A Government will recommend, and Parliament will approve, or otherwise, a proposed level of benefit, determined in the light of the needs of the pensioners, and other beneficiaries, and related to the state of the economy generally. It has no relation whatsoever to whatever income they may receive from this Fund. It is wrong, therefore, to say that the Insurance Funds contributors have in any way lost money by virtue of the investment of surpluses in Government securities.

It could be argued that the existence of the Funds merely reflects the way in which past surpluses of income over expenditure in one part of the public sector have been accounted for, and the investment of the Funds in gilt-edged is little more than one of several possible accounting devices. As the noble Lord, Lord Drumalbyn, said, when they wound up the old scheme what was in the surplus at that time was put into this Fund. Subsequently, any money coming into the so-called Insurance Fund is little more than money passing through a current account. There is no real Fund in this at all; indeed, is is a misnomer to use the word "Fund": and I think the noble Viscount, Lord Eccles, will agree with this. It is very much a two-dimensional matter.

There are two other points that I would submit for consideration, and they have been touched on by both the noble Viscount, Lord Eccles, and my noble friend Lord Leatherland. The funds under the control of the National Debt Commissioners are of such a size that it is impossible to consider their investment policy without taking into account the Government's economic and financial policy generally. The National Insurance Funds, as my noble friend said, together comprise some £1,650 million of assets but the Savings Banks funds are considerably more than that, and amount to something like £3,000 million. Obviously, we have to consider what would be the effect of a move by which the Government sold some of its holdings in gilt-edged and invested them in equities. The immediate effect would be that the price of gilts would fall and equity prices would rise. The Government would still have to borrow, and the money lost by the sale of stock in the public sector funds would have to be found from elsewhere in the market. This would further depress the price of gilts and the Government would have to sell even more debt in order to raise the same amount of money. At the same time, large purchases of equities by the Commissioners would put large sums of purchasing power into the hands of the private sector and have serious repercussions on the control of money supply. If that were done, then other Government action would be needed: tighter controls on credit or the sale of further long-term debt to the private sector.

It can be seen, therefore, that my noble friend is getting into very deep waters indeed. Incidentally, even if we took his own criteria about benefiting this hypothetical, as one might almost call it, insurance fund, it is not certain that their interests would have been protected had action been taken in the last year or so to invest in equities. Supposing 20 per cent.—and I think my noble friend Lord Addison, with his great experience, would suggest that probably if you are going to have a fund, 20 per cent. in equities as against 8 per cent. in gilts is not an unreasonable proportion—had been invested in equities a year ago. The Financial Times 500 Share Index at that time was about 176; it has now declined by some 19 per cent. If the sums had been invested at the end of January when the Index was about 194, the decline since then would have been even greater, 26 per cent.


My Lords, will the noble Lord forgive me for intervening for one moment. I also pointed out that the advisers to the trustees would be using their common sense and justice.


My Lords, I shall come on to that point later. What my noble friend is saying is that if there was a power he would not expect them to have used it in recent circumstances. I quite accept that. But I am pointing out that if my noble friend is talking about the loss to the Insurance Fund contributors, this loss would certainly have taken place if any movement had occurred in the last year from gilts into equities. The market value of the Fund would indeed have been 4 per cent. lower now than it was a year ago if only 20 per cent. of the gilt-edged holdings had been switched into equities. Clearly, over this recent year my noble friend would not appear as the untarnished champion of the Insurance Fund contributor.

But he says—and my noble friend Lord Addison says again—that they are only asking for powers; not making it obligatory to invest 20 per cent. or any other proportion, but only seeking permission. This is the point. But it would be reasonable to expect that if permission were given it would be used. If there was any expectation of any movement at all into gilts at the present time, if the Government appeared to be making this decision now to give power, then the effect would be very serious indeed on the gilt-edged market.

My Lords, in any other debate, and not in the context of this Bill, I would not disagree with my noble friends about the value to the nation as a whole of the Government's moving into equities. I am in favour of this. I have always wanted us to increase our collective stake in the national asset. I want the British people as a whole to share in the economic growth. If there is to be any depreciation of money, then the more that ownership of goods is widely shared, the better for social justice. But I agree with the noble Viscount, Lord Eccles, that we shall never get social justice if we lose confidence in money. It would be quite wrong here to do anything that would undermine the general acceptance of the value of Government securities.

If we want to move into equities, if we want to increase the national holding of industrial shares, then it is conceivable that there are other effective ways of applying such a policy. For example, there is the Industrial Reorganisation Corporation and the use of measures under the Industrial Expansion Act. But I cannot advise that the Bill which is now before us is the right way to seek what basically I think my noble friend is after; and I cannot advise the House to accept it. On the other hand, although it is a small Bill, it is an important matter and I think it would be wrong to have a decision or a Division taken by a House which possibly was not quite so representative as the importance of the subject demands. I would not, therefore, try to contest my noble friend if he wished to press this matter.

5.46 p.m.


My Lords, may I reply quite shortly? I said in the debate in May that there were always three stages in persuading the Treasury about anything. The first was that you raised the subject, and they said you had done it quite well. The second was that you raised it and they said there was something in what you said, but not much. And the third was that they brought it in themselves and said how bright it was of them to have thought of it. I earnestly hope that the friendly words at the end of my noble friend's speech were an indication of some possibility of that process being completed at a later date.

As to the arguments, I would say only one thing. I listened very carefully to all of them, and not quite all but most of them were directed to the wisdom or not of buying equities. I did not venture to express any opinion about that at all. I merely said that the very expert people—the Chancellor of the Exchequer, the Governor and the Deputy Governor of the Bank—ought to be given the opportunity to do so if they wanted to. It is not true that the population of the country and the contributors to the National Insurance Fund are the same people. One has only to count them. There are about 55 million people in the country, and the people on whose behalf contributions are paid number about 22 million, and that figure includes the women who come in on their husbands' rights. There it is; they are not the same. Therefore, to that extent I think that the procedure is unfair.

I do not want to press that kind of point now, but I would just quote from what my noble friend said on the last occasion, to show the kind of mistake he fell into. With great respect to him, I think he did so to some extent to-day. He said: It is impossible to differentiate between the members of the public whose money the Fund is and the nation, since the nation is made up precisely of those same members of the public".—[OFFICIAL REPORT; 6/5/68, col. 1316.] It is not, my Lords. There are about twice as many in the nation.

May I answer the noble Lord, Lord Drumalbyn. I am not going to answer him in detail, but I think he will find the answer in Section 84 of the 1965 Act. The fact is that the only source, so far as I know, from which the Reserve Fund is fed is the National Insurance Fund itself; that is to say, it is made up of contributions, including of course some Government contributions. I quite accept that. Lastly may I say this—


My Lords, I am sorry, but may I intervene because I did not answer the point? The Reserve Fund is not now made up from contributions. It was the surplus which at that point of time happened to be existing on the old schemes when they were wound up.


My Lords, I think the short answer is in subsection (5) of the section I quoted, and I will read it: There may be transferred from time to time from the National Insurance Fund to the National Insurance Reserve Fund such assets as the Minister"— that is the Minister of Health and Social Security— with the approval of the Treasury. may determine". There is no dispute about that. After all, it is quite clear. I ought to have made it clearer than I did—I do not think I actually said it and I should have done; and I should like to take this as an instance—that some of the other funds may raise other questions; and I should not object to that. But the object of this Bill is the really not very wicked one of trying to stop the Treasury from going on doing something which I think is both wrong and silly. If they go on doing it I do not know where they will stop; and as for ruining the gilt-edged market, I just do not believe it. This amount of money will not make any difference. It is a question of dealing with it carefully and the extent to which we do it. But those are all questions that I would not venture to answer. Finally, may I thank your Lordships most warmly and sincerely for listening to a subject that is rather dull.

On Question, Bill read 2a, and committed to a Committee of the Whole House.