My Lords, I beg leave to ask the second Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what special steps they have considered to recoup capital gains expected to be made by recent buyers, including foreign buyers, of Government stocks when the MLR is eventually reduced.
My Lords, no such steps have been considered, nor do Her Majesty's Government consider them appropriate. In general, in the case of persons who are resident in this country, capital gains tax is already chargeable in respect of sales within 12 months.
My Lords, while again thanking the noble Lord for that Answer, may I ask him this? If the industrial losses that we all know about, the redundancies and the unemployment are justified by the noble Lord and the Government, in order to create the conditions under which the MLR can be reduced, can he really at the same time justify a situation which brings windfall profits to the money speculators?
My Lords, it is quite wrong to describe the people who subscribe to Government debt, and who, of course, include pension funds and insurance companies, as money speculators. We have to face the facts of the world as they are. We have a public sector borrowing requirement which is very high. It is essential, in the interests of abating and, ultimately, eliminating inflation, that that public sector borrowing requirement should be met by raising Government debt. This can be done only on terms which are acceptable to the people who lend the money.
My Lords, while I join in the sympathy for the pension funds, may I ask whether the noble Lord really believes that the £300 million which we understand was contributed during the past week from overseas for Government stocks, was made available for any other reason than the expectation of a capital gain?
My Lords, the prospect of making a capital gain, particularly on long-dated stocks, is one of the factors taken into account by the people who subscribe for those stocks. If such an expectation did not exist, the Government would need to pay an even higher rate of interest than they do at present.
My Lords, is it not in any case the fact that when the MLR rose suddenly by such a lot, the holders of gilt-edged—pension funds, trade unions and everybody else—had to suffer an enormous reduction in the capital value of their holdings?
Yes, my Lords. It is a very valid point that the prospect of making losses, as well as the prospect of making gains, is one which always exists.