Motion made, and Question proposed, "That this House do now adjourn."—[ Mr. Sparks.]
I propose to refer to some aspects of the National Insurance Funds. In recent years, a number of my hon. Friends and I, on various occasions have criticised the investment policy of the Government in the National Insurance Funds. We have particularly commented upon the way in which money has been put into what is called "Dalton" stock. "Dalton" stock, in official language, is 2½ per cent. Treasury stock redeemable in 1975 or after. As the stock at the present time stands at about 74, it will probably be a very long time thereafter, if it is ever redeemed. My hon. Friends and I have on several occasions charged the Government with encouraging the National Insurance Funds to make these purchases of "Daltons" and other undated stocks in order to rig the markets, especially at times when nationalisation of an industry was in progress, because we said that they were trying to push up the prices of long-dated securities in order to bring down the rate of interest to the unfortunate people who were to receive, in due course, compensation stock.It is a different aspect of the matter to which I wish to refer this evening. First, let me point out that the total amount of "Dalton" stock outstanding at the end of the last financial year was £482 million. The Insurance Funds which were absorbed on 5th July, 1948, into the National Insurance Funds at the time of their absorption held £168 million out of the total of £482 million in existence of "Dalton" stock, and by 31st March, 1949, the holdings of the National Insurance Funds amounted to £201 million. For all I know, by now, if these purchases have continued, they may well hold one-half or more of the total amount of "Dalton" stock outstanding. That shows the extent to which the National Insurance Funds have plunged in "Dalton" stock. Now we come to consider the Unemployment Fund in particular, which was one of the funds absorbed on 5th July, 1948, into the National Insurance Funds. At the time of its absorption, the Unemployment Fund held £80 million nominal of "Dalton" stock. On many occasions, inquiries have been made in this House as to what was the loss on that stock, and the former Chancellor of the Exchequer always said that there was no loss because none had been sold. On 11th May, 1948, I asked the former Chancellor of the Exchequer:
He replied:"Will the right hon. and learned Gentleman say what has been the loss on the holding of "Dalton" undated stocks?"
On 4th July, 1948, that £80 million nominal of "Dalton" stock had cost the Unemployment Fund £73 million. Its market value was only £61 million—a depreciation of £12 million. On 5th July, the following day, that Fund and the other Insurance Funds were absorbed into the two National Insurance Funds. There was the National Insurance Fund itself, which was really for revenue purposes, and the National Insurance (Reserve) Fund, which was for capital purposes. When we see the accounts for these funds for the period commencing 5th July, 1948, we find that without even a stroke of the pen the book values of these stocks had been reduced to market value, although no provision had been made to cover the depreciation. The column containing the book values Was headed "Cost Price," although the price there shown bore no relation to the cost. It is only when we look at the explanatory note that we find it mentioned that the stocks had been re-valued at the market price prevailing on 5th July, 1948. Where did the loss fall? There was clearly a loss. The Comptroller and Auditor-General, in his Report on the National Insurance (Reserve) Fund, stated that the loss on re-valuation at 5th July, 1948, was £12,000,867. Where did the loss fall, and what happened? If there had been a notional sale and purchase at the prevailing market price, one would expect to find a loss shown in the old funds, but there is no sign of that whatsoever. If there was no purchase, even of a notional character, why do we still find the book value entry in the National Insurance (Reserve) Fund shown at cost price, unless it is an endeavour to disguise the losses which have arisen through this collapse in the "Dalton" Stock? Apart from any question of the accountancy, there is another question of practical importance. The National Insurance Act provides that the income from the National Insurance (Reserve) Fund shall be transferred to the National Insurance Fund, and the Treasury has given this definition of income in a direction: that income shall be taken as interest plus profits on realisation less losses on realisation. Therefore, when the time comes for the "Dalton" stock to be gold there will be a fictitious profit, because the cost at which the "Dalton" investments are shown is very considerably below the original cost. In other words, this is potentially an improper transfer from capital to revenue. I feel that the provisions, and certainly the intentions, of the National Insurance Act have been avoided. When we look at Section 36 we find this:"There has been no loss because they have not been sold."—[OFFICIAL REPORT, 11th May. 1948; Vol. 459, c. 1960.]
"(3) Any sums determined by the Treasury to be income of the National Insurance (Reserve) Fund shall be paid into the National Insurance Fund.
So it is perfectly clear that it was the intention of the Act that there should be no transfers out of the National Insurance (Reserve) Fund for any purposes except those laid down, that is to say, the transfer of income proper, without the authority of this House. What has been the motive for the curious treatment of these Funds? I do not think that the real motive was any desire to appropriate capital to revenue purposes. It was to remove traces, as far as possible, of the most unfortunate gamble in "Dalton" stocks. I want to ask the right hon. Lady to give an assurance that in the next account to be issued what is shown as cost price will be the real cost, or, failing that, that in the accounts themselves, apart from any explanatory note, there will be a clearly marked footnote to the investment columns calling attention to what the original cost really was. Otherwise it seems to me that the original cost will disappear altogether from the records and for all I know it will not even be mentioned in the explanatory note. I ask her again to explain where this loss really fell and why it was not shown in the accounts. I think I am now giving the right hon. Lady the opportunity of having the last word in this Chamber, but I can assure her that she is not likely to have the last word in the Chamber to which we shall move tomorrow.(4) Subject to the foregoing provisions of this section and any other provision of this Act expressly directing payment out of the National Insurance (Reserve) Fund, a payment out of that Fund shall not be made otherwise than under the authority of a resolution of the Commons House of Parliament."
It falls to my lot tonight to be the last speaker at this Box. It is appropriate enough that it should be a woman who has the last word, but this is such an important occasion, Mr. Speaker, that I should like to yield that distinction to you. I hope that the hon. Baronet the Member for Sutton Coldfield (Sir J. Mellor) will agree with me that on an occasion of this kind our Speaker should have the final word in this House.I have no intention of allowing my last speech in this House to be marred by any acrimonious exchanges with the hon. Baronet, although he has tonight and in the past tended to provoke me. It is said—I am sure that the hon. Baronet will allow me to say this tonight—that women are more sentimental than men, and I must admit that tonight I am experiencing some emotion as I stand at this Box for the last time and recall the many occasions when I have stood here during recent years, often late at night, answering Adjournment Debates and Prayers. Like right hon. and hon. Gentlemen who spoke yesterday, I am glad that I am going back home. But I have one regret. I want to make this last farewell—and I believe that it will be endorsed my many hon. Members here tonight. My one regret is that we are leaving this Despatch Box behind, this black, ugly Box of no intrinsic value, a Box which I have felt under my hand so often and which I have grown to love. As the hon. Baronet was speaking tonight I could not help recalling the days when I was in the unpopular Department of the Ministry of Food, when he helped to attack me on many occasions. Then I gripped this Box, but later, when I became immunised to attack, I just felt it firmly. Now I touch it lightly and affectionately as I say farewell, and I find no comfort in the thought that we are leaving this old friend behind and that tomorrow I am to meet a beautiful, elegant new one. Having said my last farewell, may I say to the hon. Baronet that I regret that during Question time in the last few weeks, during which he has asked Questions on this subject, I have been unable to satisfy him about the form and content of the accounts which he has discussed tonight. We could, of course, have amplified them and we could have added many details which, I am sure, would have satisfied him. I know the House recognises that a Department must limit a document of this kind. I would remind the hon. Baronet of the many pages in it already. The House would feel aggrieved if my Department were guilty of producing a document which called for too much study. In the first place, let me address myself to the form of account. I have endeavoured to show that the fact that securities were brought to account in the new accounts at market value as at 5th July, 1948, was clearly stated in the published accounts. These accounts are framed, I agree, on a strictly cash basis and do not show notional losses or profits arising from revaluation of investments at specified times. The hon. Baronet will agree that that is usual in accounts of this nature. Any losses or gains arising from actual sales or redemption of holdings are of course cash transactions and are accordingly recorded in these accounts. In 1948, as the absorbed funds closed with a balance of investments which stood in our books at that time at £897,895,957, the accounts had to be closed at that figure. He must also remember that this grievance of his cannot continue, for in 1948 it was a once for all revaluation which will not be repeated, and as the new funds start with those investments revalued at £885,027,985, they have, of necessity, to be shown in the accounts at that figure. I think that the effect of this valuation is clearly brought out in the accounts and in explanatory notes. The hon. Baronet rather brushed these explanatory notes aside. I agree that to understand these very detailed accounts one has to peruse them very carefully. Having done that, it should be clear that we have not sought to evade anything. For example, item I, statement V, on page 10, at the top, says:
then it gives the figure, which I have just mentioned, of £885,027,985. Then we see, if we go back to the explanatory note—no deception at all—on page 2, that paragraph 4 says:"Investments transferred at market value as at 5th July, 1948 (see paragraph 4 of explanatory notes)"—
Underneath, it says:"Investments at cost are £897,895,957 5s. Id."
"The investments were revalued as at 5th July, 1948, at market values which amounted to £885,027,985."
Might I ask a question?
Perhaps the hon. Baronet will let me continue. He will agree that these accounts are very detailed. If that point was followed carefully, and I accept it, that it needs some study and some concentration, it will be clear to anybody that my Department has not sought to evade anything. It must be emphasised that the notional loss is only a paper loss. There could be no question of an actual cash loss unless the securities have to be realised at a price below their original cost price, when they were bought for the absorbed funds. Of course, they would be brought into the absorbed funds. Moreover, the investments are included in the accounts at the new cost price which is a new revalued figure. I apologise for calling it a cost price, but the hon. Member must recognise that the Treasury agrees with this form of presenting accounts. It has implemented the undertaking given during the examination of the accounting adviser, and the hon. Member will recall that the officer was questioned on this matter by Public Accounts Committee on 10th May, 1947.
I have got that before me. The Chairman of the Public Accounts Committee, my right hon. Friend the Member for Blackburn, West (Mr. Assheton) asked the accounting officer
He meant the cost price, not a purely fictitious price."whether in the new accounts you will show the nominal value, the cost price, and the market value."
If that is so, this document has been published for some time and why has there not been criticism by this Committee set up to examine the accounts? If I may say so, with all respect—
The hon. Lady has asked me another question, and I hope she will permit me to reply to it.
This criticism only comes from the hon. Gentleman, and not from those bodies which are set up for the purpose of examining the accounts and criticising them.
The right hon. Lady knows that the Minutes of Evidence taken before the Public Accounts Committee when this matter was under consideration had not yet been published, and we cannot, of course, refer to any confidential copy which we may have in our possession.
I should like to come to a concession, although I am not quite sure that the hon. Member will be satisfied with it. However, at least I am trying.The accounts of the fund for 1948–49, as I have already said, were prepared in accordance with Treasury direction, and I would remind him of what the former Chancellor of the Exchequer said when the hon. Gentleman challenged him on this subject. It may have been the last time my right hon. and learned Friend answered Questions in this House, when he said that
Despite that, I am anxious to help the hon. Member. In the Statement of Accounts there is perhaps a slight tendency to confuse the matter unless it is read very carefully. I suggest that to the accounts of 1949–50 a footnote could be added to the statement on page 13 to this effect:"I am prepared to state that I believe the accounts are in the best form."—[OFFICIAL REPORT, 4th July, 1950; Vol. 447, c. 243.]
I am glad the hon. Member is satisfied with that, and I think that will clarify it a little. Now we come to the 2½ per cent. Treasury stock. The questions put by the hon. Member were directed mainly as ascertaining the amount of the notional loss which arose on the holdings of 2½ per cent. Treasury stock when a comparison is made between the cost price, that is the cost price at revaluation, and the original cost of the absorbed fund to the National Insurance Reserve Fund. I feel that it is necessary to give these figures, and I ask the hon. Member to forgive me if I give them fairly quickly, because I am anxious to hear Mr. Speaker wind up the proceedings. The figures are these. The original cost price of the holdings of 2½ per cent. Treasury stock, to absorbed Funds was £159,112,934, to the National Insurance (Reserve) Fund for purchase after 5th July, 1948, was £25,609,390, making a total of £184,722,324. The cost price of holdings at 31st March, 1949, was £153,924,166. The nominal value of the stock held at 31st March, 1949, was £201,400,251, and the market value at that date was £162,466,560, showing a nominal profit of about £8½ million when compared with the cost price of £153,924,166. The further purchases that have been made between 31st March, 1949, and 8th July, 1949, have brought the total nominal holdings of the stock to £212,209,062, with a corresponding cost price of £162,746,550, and the market value of these holdings at 31st March, 1950, was £146,291,622. In order that Mr. Speaker shall have a few moments in which to speak, may I conclude by saying that the responsibility for these investments lies with the National Debt Commissioners. I hope, therefore, that the hon. Baronet will not hold me completely responsible for making the investments which he feels should be criticised. And now, Mr. Speaker, I would ask you to finish this Debate by giving us your blessing."In the case of securities transferred under Section 66, as part of the assets of the former schemes of unemployment insurance, national health insurance and contributory pensions, the current market value on transfer was taken at cost price."
This may be strictly out of order but I feel that we could not leave this Chamber without saying goodbye, even if it is somewhat informal. We have said "Thank you" to the Lords officially, but I am sure that every one of us who is going to another Chamber tomorrow is feeling that he is losing an old friend. I know that to many hon. Members it is the only Chamber they have known. The right hon. Lady said she objected to being "off with the old love and on with the new," but I am sure she will like the new when she gets to know it. I realise that everybody feels this is goodbye to an old friend who has served us well, maybe at great inconvenience to some others; but we are most grateful and are sorry to go. It is always hateful to say goodbye and we are saying goodbye tonight. There are only 198 Members who are really going home, to a home that they know. All the rest are going to a strange home, but I hope they will find it a real home, too.If I may finish this on a personal note, I would say that I have not been Speaker the whole time since the Chamber was destroyed, but very nearly the whole time, and for me, anyhow, these nine years in this Chamber have been a very happy nine years indeed. That is all I have to say. On behalf of all, goodbye to this old friend and good luck to it.
Question put, and agreed to.
Adjourned accordingly at Twenty-nine Minutes past Ten o'Clock.