LOAN CONVERSION BRINGS GREAT WAVE OF OPTIMISM.

Star (Christchurch), Volume XLIV, Issue 495, 2 July 1932, Page 1

LOAN CONVERSION BRINGS GREAT WAVE OF OPTIMISM.

Beneficial Reaction on Trade Expected to Follow Scheme.

British Official Wireless. (Received July 2, 12.30 p.m.) RUGBY, July 1

An immediate response was accorded the great conversion scheme, whereby it is proposed to convert the whole of the 5 per cent 1929-1947 war loan, amounting to over £2,000,00 0,000, which is in the hands of 3,0UU,000 holders and to continue the loan at per cent interest. The news has given intense satisfaction. Viscount Snowden described the offer as a bold venture, but one fully justified by the greatly improved national financial position and the strength of British credit. He added: “It may well be the beginning of a great trade revival. It will renew confidence, which is an essential condition to prosperity. The success of the operation will have a profound influence throughout the world.”

The optimism engendered by the Government s announcement was evident in commercial and industrial circles throughout the country to-day and immediate beneficial results to trade are anticipated from the distribution of the special bonus of 1 per cent to all who convert this month. The net saving of £23,000,000 effected by the interest reduction gives added hopes ot lower taxation.

Mr Neville Chamberlain and Major Elliot signed the first application form converting their own War Loan holdings.

On the Stock Exchange there was intense excitement following the Chancellor’s announcement of the conversion, with spectacular jumps in all British funds and heavy buying. The leading dealers in *he consols market were summoned to the Bank of England to confer regarding the basis for dealings. Immediately they returned active business was resumed.

The huge task of printing the forms for the conversion scheme began immediately after the Chancellor announced the project last night. Officials will print 15.000.000 forms and dispatch them by post in nearly 3,000,000 envelopes, within twenty-four hours. Mr Baldwin’s Broadcast.

Mr Baldwin, in a broadcast speech on the conversion scheme, said that if he might judge by what he saw in the House of Commons and in the papers to-day, and what he heard being said everywhere, there was not a shadow of doubt that the public would see this thing through. “We have gone a long way since the dark days of last autumn,” he said, “ but much remains to be done. One of the obstacles is the burden of taxation, and it is the duty of the Government to seize every chance of reducing expenditure, and thus reducing the amount to be taken from the people in taxation. It is providential that just when our burden most needs reducing there comes this chance of making a very large saving in debt interest, whilst scrupulously observing every obligation to which the faith of the country has been pledged. “ The greatest pre-war scheme for the conversion of debts in this country was that effected by Lord Goschen in 1888. The immediate saving then effected was £1,400,000 yearly. The immediate saving aimed at in the present scheme is about sixteen times as great. Lord Goschen was dealing practically with the whole of the national debt at that time. Our scheme relates only to the war loan, which is less than a third of the present national debt. The scheme is of equal importance for industry. There is the great mass of £2,000,000,000 in stock bearing 5 per cent interest which has been a dead weight on the capital market for many years. Neither the State nor local authorities nor British industries could obtain capital on such cheap terms as our restored national credit really justified. This scheme, when it is through, will enable industry to get the money it needs more cheaply, and will do more than any other new thing the Government or country can do at the present moment—set the wheels of industry going again.” Mr Baldwin read a letter from the Prime Minister to the Chancellor, in which the former said: “ The holders of the loan, large and small, will, I am confident, respond to the Government’s appeal with the same goodwill and patriotism, which the British people have always shown when a great national effort is required. If every holder of the war loan plays his part by responding quickly another great step forward will have been taken towards the restoration of national prosperity A Treasury Triumph. The House had no inkling of Mr Chamberlain’s statement until it saw the front bench unexpectedly fill up. Cheering broke out as Mr Chamberlain announced the details of the scheme. He explained that Major-General the Right Hon J. E. B. Seely, Chairman of the National Savings Committee, had agreed to take charge of the arrangements necessary to familiarise the public with the scheme. The Government Stationery Office has been working in hot haste under lock and key since five o’clock on Thursday, printing 3,000,000 forms enabling holders of bonds to indicate their intentions regarding their holdings. These will be completed in twenty-four hours. The secrecy with which the matter has been organised is as a triumph for the Treasury*

The broadcasting programme was in» terrupted in order that a verbatim report of Mr Chamberlain’s speech couldL be broadcast.

It is estimated that the conversion will save £32,000,000 a year, beginning on June 1, 1933. Allowing for the conSkquent reduction in income tax and surtax, the net saving will be £23,000,000. Lord Ilailsham, in the House of Lords, read Mr Chamberlain’s announcement in the House of Commons. In the House of Commons, the Labour leader, Mr George said that the Opposition was delighted that at long last an effort was being made to put this enormous debt on a proper footing. “We agree that it i* the very best form of economy,** he said. “We think that every stockholder ought to be willing to fall inti* line with the Chancellor’s suggestiom^ Sir Austen Chamberlain, in lating the Chancellor on his wise actioH expressed his confidence that it would? meet with the response we have a right to expect.” Sir Godfrey Collins said that this was the most momentous announcement since the war. They Ijad just listened, to a complete vindication of British credit in the eyes of the world. Government Applauded. The newspapers unreservedly apt plaud the courage of the Government in tackling the conversion of one-third of the total internal debt. The sum of £2,000,000,000 out of a total of £6,329,000,000 will be affected. On this, the interest cost to the State is £267,000,000 annually. “The Times” describes it as a great conversion scheme, and says: “The Government need not be diffident about the public response. There has been neither fear nor doubt in thorf keen expectancy with which the city* and public 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 tho Government credit steadily and rapidly gaining, a 5 per cent debt is a costly anachronism, diverting the investor from other Government stocks.” The “Daily Telegraph” says ' that some holders will be disappointed that only 3£ per cent is offered, w'hereas they expected 4, but the vast majority will accept. The present holders of the War Loan, whenever they purchased it, have done exceedingly well out the investment.