§ Mr. Nottasked the Chancellor of the Exchequer (1) what criteria he adopts before deciding, in the interests of stockholders, whether to apply a sinking fund to the purchase of stock before its final redemption date;
(2) if the operation of a sinking fund on Government stock can affect the marketability and therefore the market price of a stock; and why the sinking fund on Redemption 3 per cent. 1986–96 has not been applied since 1971;
(3) following the answer on the sinking fund on Redemption 3 per cent. 1986–96 given to the hon. Member for St. Ives on 27th June, whether the stockholders have a greater assurance of redemption at par on Redemption 3 per cent. 1986–90 as a result of the existence of a sinking fund on the stock than would be the case if the sinking fund did not exist.
§ Mr. DellThe criteria for the operation of sinking funds are laid down in the prospectus of each stock or in the relevant legislation or the undertaking given by the Government at the time of the issue. Among the factors that can influence market price is demand arising from the operation of a sinking fund.
The sinking fund for 3 per cent. Redemption Stock has not been applied to the purchase of that stock since 1970 because the stock has not been available at a suitable price; sums available to the sinking fund have been applied instead to the purchase of other securities. The existence of a sinking fund for this stock does not enhance the assurance of redemption. The stockholders are fully assured of redemption at par on 1st October 1996 or, at the option of the Treasury, on or after 1st October 1986.