CONVERSION SCHEME

Hokitika Guardian, 2 July 1932, Page 5

CONVERSION SCHEME

FOR WAR LOAN

{i, • CUT IN BRITISH INTEREST.

(British Official Wireless.)

RUGBY, June 30. Mr Neville Chamberlain announced in the Commons to-night, a sdnuno lor the conversion of the great five per cent, war • loan, of which over two y. thousand millions is now outstanding, v Mr Chamber.ain said: “The GovernC ment intend -to repay the loan jn cash «n December 1 next, to any holder who decides to apply for repayment within three months from to-day, but holders in the iloan at .the same time, are inMted no continue in the .loan on altered conditions, and- it is my confident hope that th e greao - mass of holders ■will respond to this invitation.” The Treasury, in accordance with the prospectus of January 11, 5 1917, will redeem the outstanding amount of the loan at par, on December 1, 1-32. At the same time they invGe any holder of stock or bond,"- who wishes. to. do so to continue his holding in'the loan after the' redemption date, subject to certain modifications. The principal modifications are:— Firtly, rate of interest to be reduced as from December 1, 193#, : to three and a half per cent, per aimum. .Secondly, the loan to' bo "redeem* abl 6 at the option of the Government ■at any time after December 1, 1952, but not earlier, either in a single operation or by installments, : Thirdly, . the title be changed ( to thfe e and ■ a-half per cent. Whr Loan. Dividends wild continue., as before, to be paid without' previous deduction of income the existing . exemptions from United Kingdom taxation, in favour of holders domiciled or resident, outside the' United Kingdom, will continue, in force. Holders who notify vtheir assent ! to continuance, not later than July will be paid cash bonus at the rate of £1 per £IOO nominal of the stock. Under special provisions which were embodied in the Act of Parliament lai-t autumn, any Iholder who by September 30 has ,nei:her applied for his holding to be continued, nor applied for redemption, will be treated as i f h° had accepted the offer to have the holding continued. The House of Commons had no inkv ling that Mr Neville Chamberlain was to make his statement regarding the big loan conversion, until it saw the

front bench unexpectedly fill up. / Mr Chamberlain, amid cheers, then y announced the details, of tlfe scheme. j He explained that Major General Seely had agreed to take charge of

the. 'arrangements for familiarising'

, the public'with thef£‘6lieme7‘' The' St&.(tionery Office had been working in hot haste, under lock and key, sine© five o’clock on Thursday, printing three million forms, enabling the holders of the war loan stock to indicate their

intentions regarding their' holdings, These would be completed in twentyfour hours.

The secrecy with which the matter has been organised ia regarded as a triumph for the Treasury. The 8.8. C. broadcasting. programme was interrupted in order' that a verbatim report of Mr Chamberlain’s speech could be broadcast.

( ESTIMATED SAYING £32,000,000

EXPRESSIONS OF

LONDON, June 30. It is estimated that the- conversion of the war loan will save thirty-two millions per year in interest, beginning on June 1, 1933. - Allowing for .the consequent reduction in income , tax and surtax, the nett saving will be twenty-three millions.

Lord Hailsham, in the Fou: c e of Lords, read Mr Chamberlain’s announcement. In the House of Commons, Mr Lanshury (Labour Leader) said that the Opposition were delighted, that, <bt long last, an effort was being; made to put this ©’inrmQus debt, on a proper, footing, The OppositionKritgreod

that it wpis the very h»st form of

economy. He said:—“We think-that 4 ©very stock holder ought to be twilling * to fall in line with the Chancellor’s suggestion.” ... ; Sir Austin Chamberlain congratulated, the Chancellor on the wise action taken. He expressed confidence that it “would meet with the response that ' w© have a irigh't to expect.” Sir Godfrey‘Collins said that this "was tl7e most momentous announcejneH the war. Tbev had just listened to a comnlete vindication of British e-edit in the eyes of the world .The hank rate has been reduced to two per cent. To-dav’s reduction was the sixth reduction this year. The present rate is the lowest ficp’ire for 35. years. r\~' Crt-"deed stocks rose again to-dar ’ and left firm. PRESS APPLAUDS GOVERNMENT. LONDON, July 1. The newspapers unreservedly applaud the courage of the Government in tackling ’ the conversion of onethird of Britain’s total internal debt,. Two thousand millions out, of the total of £6,329,00,000 is affected by the conversion, whereon the interest costs to the State are now £267,000,000 annually. / '“The Times” describes (it as '“a ~v great conversion scheme.” ft rays: The Government need not -he diffident about a public response. There las been neither fear, nor doubt in the

keen expectancy with which the city and the public have followed the fortunes of Government, securities. Proof abounds that this act of conversion was looked for and desired. It is a

demonstration of social and fiscal strength unrivalled since the conversion of 1888. With the Governmentcredit steadily and rapidly gaining, a five per cent., debt is a costly anachronism which has been diverting investors from other Government stocks.

The “Daily Telegraph” says: Somo holders will be disappointed that only 3£ per cent, is offered, whereas they expected four per cent., hut the vast majority will accept. The present holders of the war loan stock, whenever they purchased it, have done exceedingly well out of their investment,”

The reduction of the Bank rate, which is now at its lowest since 1897 gave a new impetus to the boom i J| gilt-edge securitcs, of which several have reached new high records, and an enormous amount’ ■ of business has been done. ”

The “Morning Post’s” financial editor says:—The Bank rate reduction reflects a lack of demand for loanable capital. Tnditeeth-, the cheaper money may helo to stimulate trade, enabling industrial concerns to raise money on easier terms, but, for the moment, it is the timidity of investors as well ns - the cheapness of monov which causing the demand for gilt-edge securities. The Bank of England 'rate is now the lowest of any Central Bank exec.i t that of Switzerland.