The Wanganui Chronicle SATURDAY, JULY 30, 1932. BRITAIN’S CONVERSION LOAN

Wanganui Chronicle, Volume 75, Issue 178, 30 July 1932, Page 6

The Wanganui Chronicle SATURDAY, JULY 30, 1932. BRITAIN’S CONVERSION LOAN

THE success attending Britain’s conversion loan operations now being brought to a conclusion in London, recalls the similar operations which were conducted by Robert Walpole when he was Chancellor of the Exchequer. It is a curious fact also that his Redemption Bill was introduced into the House by himself the day after his resignation from his office. In so introducing the Bill he said that ‘‘he now presented this Bill as a country gentleman, but he hoped that it would not fare the worse for having two fathers, and that his successor would take care to bring it to perfection.” Briefly, Walpole’s proposals were: (1) “That all the public funds redeemable by law that do now exceed five per centum per annum be redeemed ... or with the consent of the proprietors be converted into an interest or annuity not exceeding five per cent, per annum, redeemable by Parliament; (2) that His Majesty be enabled to borrow of any person or bodies corporate such sums as shall be requisite to redeem the said fund at any rate not exceeding five per cent, per annum. Walpole found that in consequence of the absence of suitable channels of investment he could raise money at four per cent. He thereupon proposed to raise £2,500,000 from the Bank of England and £2,000,000 from the South Sea Company. When Walpole went to his office two years previously he had found a public debt of some £50,000,000, some of it paying interest at 8 per cent. To throw this debt, or a large part of it, on the market, would embarrass city interests, thought Walpole. But the rate of interest at four per eent. was too low, and from April 19, 1717, to March 8, only £45,000 was subscribed to an issue of £600,000, the city having organised a block against the issue. On March 23 the rate was raised to 5 per cent., whereupon the £600,000 was immediately subscribed. This was the first of the refunding proposals which effected a reduction of the interest burden of Britain’s national debt. Mr. Neville Chamberlain certainly did not make the mistake made by Sir Robert Walpole. Like Walpole, he awaited for a favourable moment when there was a considerable amount of money available in the city, and interest rates were comparatively low. He then proposed a Redemption and Conversion scheme very much on all fours with Walpole’s proposals, and like Walpole too, he went out for a large sum. In 1737 Sir John Barnard tried to force Walpole to pass a Bill to reduce the interest on the national debt from four to three per cent. This would have meant a saving of £500,000 a year, which then was a very considerable sum. Horace Walpole, Robert’s brother, was in favour of the Bill, but Robert, with sturdy sense and against the desire of his own Cabinet, and amid the sneers and curses of his rapidly growing enemies, got the Bill rejected. Walpole, however, knew of the dislike of city € financiers for the proposal to reduce the interest on their loans, and deemed it not worth while rousing sleeping dogs, even to save £500,000 a year. Mr. Neville Chamberlain’s skill has been revealed by the way he has enlisted the city interests in the support of his scheme. The commission concessions he has made to solicitors and to brokers have been worth while, and the bonus for immediate conversion has also had a stimulating effect upon the holders of war loan stock. The scheme would not, however, have been possible had not the bank rate been previously reduced to its present low level, or had there been alternative channels of investment which were equally acceptable to the investors.