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Public Trustee (General Deposit Fund) Bill

Volume 345: debated on Monday 20 March 1939

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Order for Second Reading read.

12.39 a.m.

I beg to more, "That the Bill be now read a Second time."

I hope that this is a Bill which will commend itself to the House. It is one of those Bills which explains its history and purpose in the Preamble. But in case there are some hon. Members who have not had time to study the Preamble, I will make a short statement explaining the point and the purpose of the Bill. In the administration of any trust there may be from time to time cash balances which are existing in that form for a short period of time pending investment, reinvestment or distribution. In the case of an ordinary single trust the balance will be put on current account, or possibly on deposit. In the case of the Public Trustee, who deals with thousands of trusts, the aggregate at any given moment of such cash balances is large, and it appeared about 20 years ago that there was in the aggregate of these balances a continuous sum which could be invested at higher rates of interest than could be obtained on deposit at a bank. For some 20 years that available balance and the aggregate amount of those fnuds has, in fact, been so invested. The trusts have benefited in that, instead of getting as one used to get, some 2 to 2½per cent. on deposit at a bank, the trusts have in fact received some 4 per cent. on those cash balances. The trusts were credited with the round sum of interest the fractional amounts above that sum going as management funds to the Public Trustee for the purposes of the fund. Certain small capital accretions went also to that purpose.

In 1936, owing to the general upward movement of Government gilt-edged secu- rities, there was a large capital appreciation—some £117,000. Throughout this period from 1918 onwards, if the movement of gilt-edged securities had been downwards instead of upwards, the Treasury would have borne the loss, that is, the various trusts were not interested in the capital appreciation or depreciation of those investments, but they were guaranteed their money and they got their advantage on the higher rates. In those circumstances it seems to us reasonable that that capital sum should go to the Treasury who would have borne the loss if the movement had been the other way. This actual business, which has been to the advantage of everyone concerned, of aggregating these balances and investing the available amount requires regularisation. It is one of those sensible things which has not been in the letter of the law, and attention was drawn to the matter—as members of the Public Accounts Committee know—sometwo years ago, and the members of the Public Accounts Committee expressed the view that the matter should be regularised. This Bill seeks to regularise the matter in the future, I hope on lines which meet with the approval of the Public Accounts Committee and also Members of the House.

12.43 a.m.

This is rather a formidable Bill to look at, and there are a good number of repetitions of the word "whereas." I am afraid that any one who looked at this Bill might think the British Exchequer was a nefarious organisation and would come to the conclusion that we are now proposing to purloin a very large sum belonging to persons unable to resist the will of Parliament. But I believe that impression would be quite erroneous. As present acting-chairman of the Public Accounts Committee I can say that the Committee did go into this matter with very great care. They came to the conclusion that there were no beneficiaries who had any claim whatever to this sum of money, and the only person, therefore, who could possibly have it was the British Exchequer, and they thought it necessary for the matter to be regularised. I do not know that they realised the complications of this Bill, but if this is the simplest way it can be done it meets with the good will of the Public Accounts Committee and it will, I am sure, be agreed that that body would not pass as legitimate anything that would in effect be depriving anybody of their just rights. Therefore, I ask my friends on these benches to support the Bill.

12.45 a.m.

I do not desire to invite the House to oppose the Second Reading, but I think that perhaps it would be worth while to point out that what the Treasury are doing in this Bill is to take an advantage to itself which a private trustee would not be entitled to do. I think I am not mistaken in suggesting that if a trustee chooses to invest funds in a security which is not a trustee security then, if a capital loss is sustained he is liable to make it good, whereas if the result of the unauthorised investment is a capital appreciation that capital appreciation belongs to his beneficiary. I think that is the law with regard to private trustees, and it is a very sound law, too. Obviously it has its advantages in keeping trustees to the straight and narrow path.

Here we are departing from that principle. We are passing legislation to exempt ourselves when we act as trustees from the operation of the general law. We are permitting ourselves to make an unauthorised investment. It is quite true that the revenue profit belongs to the beneficiary, and if there had been a loss we should have had to make it good. But we exempt ourselves from the other side of the rule, that where profit results from it we are not entitled to make a profit for ourselves out of the management of funds of which we are trustees. I am not at all sure that it is right or wise for the legislature, acting on behalf of the State, to seek to alter the general principles of trust law in cases where it happens itself to be the trustee. I do not know whether these considerations were brought to the notice of the Public Accounts Committee which came to the conclusion that nobody was entitled to benefit. I wonder who gave them that advice. We ought, at any rate, if we decide to do this, to know exactly what we are doing.

12.48 a.m.

There is one question I want to ask. I notice that, according to the Order Paper, if this Bill is passed, it is proposed to send it to a Select Committee for the purpose of examination. The Bill looks so comparatively simple, despite the views of my hon. Friend who has just spoken, and the principle seems so very obvious that I am rather at a loss to know why it should be proposed to send it to a Select Committee for purposes of examination.

This Bill seems to me to infringe very substantially all strict rules regarding the administration of trusts and the duties of trustees. It seems to me, further, to be an attack on the sacred rights of property, and, further, to do substantial justice. On those three grounds I support it.

12.49 a.m.

I regret having to intervene again, but it seems that important business is always brought on at night, and the Financial Secretary to the Treasury is always chiefly interested in this late legislation. As a matter of fact, he could almost be described as the night watchman of the Government. I noted with very great attention that the right hon. and learned Gentleman said that the Treasury had always been prepared to stand any loss and, therefore it was only right that, should a surplus accrue, the Treasury should have that surplus. I wholeheartedly agree with that principle. What I would like to have from the Financial Secretary to the Treasury is his assurance that in the event of such surplus accruing it will be used to fulfil some of the things he has failed to do up to the present with regard to old age pensions.

12.50 a.m.

I would like to answer the question put by the hon. Member for Chesterfield (Mr. Benson). The reason why the Bill is to go to a Select Committee is because it is what is termed a hybrid Bill and may affect private rights. As regards the remarks of the hon. Member for Nelson and Colne (Mr. Silverman), I appreciate what he said. He will appreciate that the increased rate of interest could only be earned by aggregating the funds. If the strict letter of the law had been observed it would have been impossible for the higher amount of interest to be paid.

Question, "That the Bill be now read a Second time," put, and agreed to.

Bill read a Second time.

Bill committed to a Select Committee of Seven Members, Four to be nominated by the House and Three by the Committee of Selection.

Ordered, That all Petitions against the Bill, presented at any time not later than five clear days after the Second Reading of the Bill, be referred to the Committee.

Ordered, That Petitions against the Bill may be deposited in the Committee and Private Bill Office, provided that such Petitions shall have been prepared and signed in conformity with the Rules and Orders of this House relating to Petitions against Private Bills.

Ordered, That the Petitioners praying to be heard by themselves, their Counsel, or Agents, be heard against the Bill, and Counsel or Agents heard in support of the Bill.

Ordered, That the Committee have power to send for persons, papers, and records.

Ordered, That Three be the quorum. — [ The Attorney-General.]