HUGE LOAN OPERATION.

New Zealand Herald, Volume LXIX, Issue 21224, 2 July 1932, Page 9

HUGE LOAN OPERATION.

BRITISH SCHEME.

DEBT OF £2,000,000,000.

jj[ONEY AT 3J PEE CENT.

OPTIONAL conversion.

OFFEB TO HOLDEKS. Telegraph—Press Association—Copyright. (Received July 1, 5.15 p.m.) LONDON, July 1. The Chancellor of the Exchequer, Mr. VeviHe Chamberlain, announced in the flouse of Commons' last evening a scheme f or the conversion of the great 5 per c(>n [ war lean of which more than £2000,000,000 is now outstanding. r> Chamberlain said: "The Government intends to repay the loan in cash on December 1 next, to any holder who decides to apply -for repayment within months from to-day, but holders in tho loan ai. the same time are invited t 0 continue in the loan on altered conditions, and it is my confident hope that the g reat mnss of h°' ( ' ers w 'll respond to this invitation." The Treasury, in accordance with tho prospectus of January 11, 1917, will redeem the outstanding amount of th# loan at par on December 1, 1932. At the lame time 't invites any holder of stock er bonds who wishes to do so to continue his holding in. the Joan after the redemption date, subject to certain modifications. - ( Largest Operation of Kind in History. The principal modifications are:—(l) The rate of interest will be reduced as' from December 1, 1932, to 3A per cent, per annum; (2) the loan will be redeemable at the option of the Government at mv time after December 1, 1952, but J jot earlier, either in a single operation j or by instalments; (3) tho title will be ; changed to the 34 per cent, war loan. i Dividends will continue as before to ; be paid without the previous deduction I of income tax and the existing exemp- j lions from United Kingdom taxation in j iavour of holders domiciled or resident j outside the United Kingdom will con- j tinue in forco. Holders who notify their sisent to a continuance not later than July 31 will be paid a cash bonns at the rate of £1 per £IOO of nominal stock under the special provision which was embodied in Act of Parliament last autumn.

Any holder who by September 30 has neither applied for his holding to be con iiaued, noi applied for redemption will be treated as if he had accepted the offer to have his holding continued. These are the broad outlines of this gigantic schema, the largest operation of its kind evt;r undertaken in Britain or iny other country. "Vindication 0i Britain's Credit. The Leader of the Opposition, Mr. George Lansbury, said the Labour Party ras delighted that at long last an effort *33 being made to put this enormous debt on a proper footing. " We are sigreed that it is the very best form of economy," said Mr. Lansbury, "and we think every stock-holder ought to be willing to fall in with the Chancellor's suggestion." Sir Austen Chamberlain, ex-Foreign Secretary, ia congratulating the Chanteller on hi«i wise action, expressed confidence that 'it would meet with the retponse he'had the right to expect. Sir Godfrey Collins (National Liberal — Greenock) said: " This is the most momentous announcement since (ho war. We ban) just listened to a complete vindication of British credit in the eyes of the .World."

The Houae had no inkling of Mr. Chamberlain's statement until members tew the front bench unexpectedly fill. Jhe Chancellor, amid cheers, announced the details of the scheme. He explained that Major-General Seely, formerly chairman of the National Savings Commission, bad agreed to take charge of the arrangements for familiarising tho public with tte scheme.

_' A conversion such as this in its magnitude is by far the greatest thing that has ever been undertaken in 1 lie history of the world," said Lord Snowden, when, as Chancellor of the Exchequer, explained in the House of Commons °n September 10 the provision necessary for the conversion operations. The British 5 pef cent,, war loan was issued Sri terms giving tho Government the right to repay it at any time after July 1929—otherwise the stock must be redeemed in 1947. " Part of the barpin was that, no matter how the financial situation might change, this rate of Interest (5 per cent.) was to be maintained until a. certain date," stated tho Loudon Evening Standard, in explanation of the proposal. " After that date State would have the option of pay">3 back the sum originally lent. It how proposes to exercise that option. The creditor is not being forced by the State t° accept a lower rate of interest than bargained for. The State merely to him, in effect, 'Here is the jsoney you lent me. If you care to «nd it to mo again at a lower rate ot interest, I shall be pleased to have it. jj i not, you can do what you l'.ko with

At the time the proposals wero announced it was generally considered that the Government would delay operations jntil interest rates had fallen sufficiently lo w to enable it to borrow fresh money 1 . 0 Pay off- holders, and when that coiv ™ion existed most of the holders would * c cept the conversion stock at a lower rate.

The concession that income tax will n , Dt b e deducted from the interest at '"e source has evidently heen made on of tho large foreign holding ot jV stock. Estimates of the holdings have varied from £100.000,C00 [° £500,000,000 It was ofhcially acknow- [ ec] ged last year that conversion might he impracticable unless the foreign holder * a s offered stock in exchange on which interest would be paid without deducon to residents abroad.