I beg to move, That the Clause be read a Second time.

The purpose of the Clause is to deal with a point made by the hon. and learned Member for Kettering (Mr. Mitchison) in Committee. Those hon. Members who were with us on that occasion will recall that he then moved an Amendment to Clause 2 of the Bill. He said:

"… attempts to put valuations on them"—

that is, trustees—

"such as the Bill makes will frighten them unnecessarily unless it is made clear that those valuations may properly be left to their judgment as to whether they make them themselves or get a broker to value stocks or shares or employ some more formal method in more difficult types of investment."—[OFFICIAL REPORT, Standing Committee B. 25th April, 1961, c. 378.]

I explained at that time, in answer to the hon. and learned Gentleman, that I thought that the words

"in the opinion of the trustee",

which were included in his proposed Amendment, went too far, and that it would not be appropriate that the trustee should be excused from liability for loss solely on the ground that, in a matter involving perhaps a difficult valuation, he had expressed an opinion.

In our view, a lay trustee ought, if he were to enjoy the protection of the law, to take professional advice in the case of a difficult valuation. Of course, the trustee does not need any protection where the valuation is a simple matter.

We had a considerable discussion on this matter in Committee, which showed that hon. Members generally were agreed that a trustee should know that in certain circumstances he had the protection of the law when he reasonably believed that he had made a division of the fund in an appropriate manner. Otherwise, a trustee might constantly be worried that he could not show that he had made a proper division and, consequently, would not be able to show that he was not in breach of trust.

I agreed to consider the matter, and the new Clause provides that when a trustee obtains a valuation from a person whom he reasonably believes to be a qualified valuer, such a valuation, for the purposes of division and for the other purposes mentioned in the new Clause, shall not be open to question. If a trustee decides not to seek the aid of a qualified valuer, he will be open to challenge, but in those circumstances, presumably, he will be confident that he can meet the challenge. Having gone a considerable way to meeting the case of the hon. and learned Member, I hope that at the outset of our labours this morning, he will, with his accustomed magnaminity, give the Clause his full support.

I thank the Economic Secretary for the attention which he has given to this matter.

I join with my hon. and learned Friend the Member for Kettering (Mr. Mitchison) in expressing thanks for the new Clause, which will be of value and which will save trustees from certain anxieties. I also take the view that the Clause comprises a correct treatment of persons employed as officers or servants.

I wish to permit myself a comment upon the breadth of language which has been employed in the new Clause. What is undoubtedly intended is that valuation as such shall be conclusive, but the words employed are:

"conclusive in determining whether the division of the trust fund … has been duly made."

That involves a breadth of language which at some future date may attract comment and observation by the courts. I have in mind that a trustee might give to a valuer, by an oversight, an incomplete statement of the trust securities. The division of the fund which would have taken place in that event would not then have been duly made, although no one would wish to question the correctness of the valuation by the valuer so far as that valuation went.

However, with that comment upon the language used, I repeat that I welcome the general purpose and intent of the Clause.

When my hon. and learned Friend the Member for Liverpool, Edge Hill (Mr. A. J. Irvine) referred to the breadth of the language, I thought that he meant to refer to the word "qualified". What does it mean? In relation to investment and valuation of investments, what is a qualified investor?

When I was first practising in Leicester, there was a gentleman called Arthur Wheeler, who was highly esteemed at the time, although he came to an unhappy and sticky end, which he faced with some courage, and whom I do not want to recall as an awful example. He was practising as a stockbroker and valuer, and he introduced a scheme of paying solicitors commission for going to him for valuations. I found to my surprise that the first time I obtained a valuation from Arthur Wheeler I got a cheque for 50 per cent. of the fee. It was the only time that I went to him, which probably saved me a good deal of money, but that was the sort of system. What is a qualified valuer of stocks and shares?

Either the Bill is intended to do something, or it is not. Having read it very carefully, I am not sure that it is intended to do very much. If in obtaining a valuation a trustee has only to say, "I reasonably believed that this man was qualified", and the test is in the trustee's mind, he may very well say that Mr. E. T. Hooley, who knew more about stocks and shares than any man in the Midlands—he invented quite a few of them—was qualified.

After all, if one is sure that one is getting honest advice from an experienced man, then it will be extremely valuable advice. But, so far as I know, there is no such thing as a qualified valuer for stocks and shares. There are reputable stockbroking firms which often do this sort of thing, while others generally decline.

I am speaking of my experience of a few years ago. I have had no practical experience for some years and it may be that I am out of date, so in these matters I always speak subject to correction. However, I suggest to the Economic Secretary that coming along on a Friday morning, to a small House, with a Clause of this kind, is a rather dangerous procedure. Later today we may have to unveil some other blunders to which our attention has been called at a very late stage.

I ask the Economic Secretary to bear in mind that although he is to ask for power to make regulations under a Statutory Instrument, he may have no power by Statutory Instrument to limit investments made by well-intended persons on the basis that the trustee honestly believed that they had the requisite knowledge.

By leave of the House, the hon. and learned Member for Liverpool, Edge Hill (Mr. A. J. Irvine) referred to the breadth of the wording in the Clause, and I appreciate his argument. On the other hand, we wanted to limit the Clause to the purposes which are there set out, in other words, the division of the trust fund, or any transfer or apportionment of property. I see the force of the hon. and learned Member's argument, but I do not see how we can deal with the matter in any other way. While it is useful that the hon. and learned Member should have pointed out this fact, I do not think that it can be cured.

The hon. Member for Oldham, West (Mr. Hale) put forward an argument which I found it difficult to follow, because, as he knows, a court frequently has to decide whether a person has acted reasonably. I join issue with him when he says that all the trustee has to do is simply to say, "I reasonably believed that a particular person was qualified as a valuer for the purposes of my trust." It would be open to the courts to inquire, to put it in this rather strange way, whether it was reasonable of the man concerned so to believe.

The hon. Member will remember that in the White Paper which started all this business we tried to set out a number of people whom we thought were qualified for one purpose or another. That caused some criticism and we concluded that the criticism was justified. One of the difficulties now is that having decided not to specify certain people, whom we thought would be qualified for all purposes to make a valuation, we have had to deal with the matter in a general way. I do not think that we can improve the Clause while meeting the point made in Committee by the hon. and learned Member for Kettering.

In a sense, it is rather loose, but it does mean that a trustee cannot go completely berserk and appoint someone to value a property which might involve a difficult valuation when it is obvious to all concerned that the person making the valuation is not qualified in any sense.

I beg to move, That the Clause he read a Second time.

Perhaps it would be convenient, Mr. Speaker, to discuss at the same time, all the Amendments to this Clause, standing in the names of the hon. and learned Member for Kettering (Mr. Mitchison) and the hon. Member for Gloucester (Mr. Diamond).

We must arrive first at the point where the Clause has been read the Second time, so as to give us something to amend.

Then I was going to suggest, subject to those with wisdom about the Bill, that we might be able to discuss together the following proposed Amendments in the names of the hon. Member for Kettering (Mr. Mitchison) and the hon. Member for Gloucester (Mr. Diamond), in line 6, to leave out from the beginning to "as", and to leave out "three" and to insert "ten"; in line 8, at the end to insert:

"and a proportion includes the proportion of one to nothing".

and in line 26, at the end to insert:

"(which may be greater than three to one)".

and then refer to their Amendment in line 12, to leave out from "order" to the end of line 13.

That is a grouping which, I think, might be convenient for the House.

If you please. Mr. Speaker.

This new Clause is in response to an appeal, and in place of an Amendment moved, by the hon. and learned Member for Kettering in Committee. He moved an Amendment which he was good enough to withdraw at a later stage because, in some ways, it did not fit exactly into the Bill. But he expressed his desire and the purposes of the Amendment in this way:

"The broad purpose is to allow the Treasury to vary the fifty-fifty rule from time to time and to make any such variation not compulsory upon any trustee, so that the trustee, if he so chooses, may simply continue the existing proportion."—[OFFICIAL, REPORT, Standing Committee B. 25th April, 1961, c. 344.]

The hon. and learned Gentleman withdrew the Amendment upon an undertaking by my hon. Friend the Economic Secretary that he would introduce a suitable Government Amendment. He was supported by the hon. Member for Gloucester, who said that if we did what he wanted to do faces could be saved. That is not a consideration which weighs with the Government.

Hear, hear.

But he said that everything could be made reasonably happy, and, of course, that is a very powerful consideration, not least on this Bill, where, at times, it seems very difficult to make anybody happy about anything. It is in response to that challenge that I move this new Clause.

Subsection (I) gives the Treasury power to direct, by Order, that any division of the trust fund into wider range or narrower range parts shall be in a proportion greater than fifty-fifty, but not greater than seventy-five-twenty-five. It might be more convenient if I defer at the moment giving the House the reasons why we stop at a maximum of seventy-five-twenty-five until we come to the proposed Amendments to the Clause.

Subsection (1) covers the case of a trustee who has not previously divided the fund. Subsection (2) allows the trustee who has previously divided the fund to make a new division in the new proportion; and, in response to the particular point made on this by the hon. and learned Member for Kettering in Committee he will see that the power is permissive. The reason for this is that the new division will be based on the value of the fund at the time when the new division falls to be made. There might well be cases where there has already been an appreciation on the equity side in the wider range part of the fund. The proportions that were mentioned in Committee were forty-sixty, and it may well happen that, when the new Order came to be made appointing a new proportion of forty-sixty, the proportions in any particular fund of the wider range and narrower range parts were already in excess of forty-sixty. It was for that reason, I imagine, that the hon. and learned Member wished the power to be permissive. It seemed to us that that was a cogent consideration.

Subsection (3) contains consequential provisions. Subsection (4) provides for the contingency that the Government might wish to proceed by stages from the proportion of fifty-fifty contained in the Bill to the ceiling of seventy-five-twenty-five, which will be permitted by this new Clause. I should point out that there is no provision for reducing the proportion. That was, I think, a feature of the hon. and learned Member's Amend- ment, but it seemed to us unrealistic to suppose that a downward movement would be likely to be necessary. Certainly, it would be a new situation which would seem to demand a new Act, rather than a Statutory Order. Subsection (5) invokes the affirmative Resolution procedure.

I thank the Government for paying some attention to this matter. It arises out of much more sweeping proposals about leaving, in effect, the choice between the narrower range and wider range investments entirely to the discretion of the trustees. I am not referring to that question now, and when I say "entirely to the discretion of the trustees," I am not speaking to the other safeguards in the Bill—matters of advice and contents of the various Schedules we shall come to in due course—but within those limits the proposal was that they should be given entire discretion.

It was pointed out in the course of argument that, under the provisions of the Bill, a fund would start in the fifty-fifty proportions, but that one thing that was quite certain was that, in the course of time, the proportions would vary and probably, in the present trend of things, in the direction of increasing the proportion of wider range investments. It was in consequence of that, and to import a little elasticity into what seemed to us to be a very rigid scheme, that we suggested what the Solicitor-General has just indicated and with which this new Clause is intended to comply, at any rate partially.

I do not, however, recollect that when the Government undertook to look into the matter anything was said about fixing some other proportion. I speak subject to correction. The proceedings were lengthy. I think that the right hon. and learned Gentleman will find that that was the position.

indicated assent.

The limitation of a three-to-one proportion is the Government's own addition. This proportion is intended to be, as I understand it, the final proportion.

Further, the new Clause provides that, once an Order has been made prescribing a different proportion, a trustee must elect within twelve months whether he will take advantage of it. That too is, I think, a new suggestion. We saw no objection, provided that the election was definite and final, to the trustee making it at a later stage. The circumstances of these trusts will be almost infinitely various and we saw no reason for any provision of that sort. It was not in our own Amendment which was withdrawn.

Accordingly, while we welcome the general idea of the proposed new Clause, we wish, on the one hand, that the Government had been able to go much further and, on the other, we make the objections which I have indicated today.

May I now move my first Amendment to the proposed new Clause, Mr. Speaker?

No. That is not quite right. We have first to find out, aye or no, whether the House assents to the proposed new Clause being read a Second time. We will then have something that we can amend and can get on to the Amendments.

I am very much obliged, Mr. Speaker.

On the Clause itself, therefore, I should like just to pick out a single word in the speech which the right hon. and learned Gentleman made a few minutes ago. He said that it would be unrealistic to suppose that the proportion would ever become a smaller proportion of wider-range investments; that is to say, if changes were made they would all be changes in the direction of a higher proportion of wider-range investments.

There is no certainty about these matters, obviously, but I should have thought that the history of ordinary shares in the past thirty or forty years, or even in more recent times, entirely supported that proposition. I feel a great deal of sympathy with what was said just now by my hon. Friend the Member for Oldham, West (Mr. Hale). Having looked at the Bill, he was not certain that it really did very much. It imposes, let us say, an optional bed of a somewhat procrustean character, and in view of the changes which will happen to any fund which has been divided in the way the Government propose, I doubt whether this bed will long prove one on which trustees will elect to lie.

The Bill will be improved to some extent by the Clause now proposed, and so far we are glad of it, but it still remains an uncommonly rigid Measure, though much less rigid than when it went to Committee and less rigid now that the Clause is being introduced, assuming that it is passed.

Therefore, we shall not oppose the Clause as a Clause. We merely take it and the felicitous words which the right hon. and learned Gentleman chose as an indication that this will be a very awkward scheme. It will be one which many people may refuse to use even with this modification because of its still somewhat rigid character and the promise given in Committee by my hon. Friend the Member for Gloucester (Mr. Diamond) that the Bill would not last long and that we should have a wider one in course of time. I would merely say on that that trustee legislation appears always to be belated and always to arrive at rather long intervals.

I should just like to say how grateful I am to the Government for having given such full consideration to this matter, and I should like particularly to endorse the reasons which they have given for having tabled the new Clause. It is most kind of them to have regard to everybody's happiness and to have decided to disregard all face-saving. I should like to reciprocate the courtesy and say that we appreciate their consideration for everyone's happiness and that we have every consideration for saving what are to us most acceptable and pleasing faces.

However, can we be told a little more about why, although this represents a very considerable breach in the original proposals of the Bill—the Government have gone a very long way; it would be discourteous not to accept that—they have at this stage introduced a new limitation to the discretion of the trustees?

I proposed to deal with that on the Amendments in the name of the hon. and learned Member for Kettering (Mr. Mitchison).

Then I will not pursue the matter now.

As my hon. Friend the Member for Gloucester (Mr. Diamond) says, the new Clause represents a substantial departure from the original proposals in the Bill—in fact, a major departure. Although the Clause does not go as far as some of my right hon. and hon. Friends want, it goes a very long way to meet their desires.

In fact, by the power taken in the Clause not only to increase the proportion of wider-range investments up to 75 per cent. by Statutory Instrument, but also to introduce further variation upwards by further Statutory Instruments, in effect the House would, by adopting the new Clause, be giving general legislative sanction to the proposition that in the course of time, if not immediately, the powers of trustees should be extended up to a point where they may be entitled to invest perhaps the whole of their funds in industrial equities instead of gilt-edged securities.

This is what some of my hon. Friends desire, and the possibilities of achieving it being contained within the scope of this Clause, and as I am opposed to any form of extension and, therefore, a fortiori, to the greater degree of extension proposed by my right hon. and hon. Friends, I think that this is the moment when I should put my objections. My hon. Friend the Member for Oldham, West (Mr. Hale) appears to want to interrupt me. I have not really said anything yet about which he can interrupt me, but I will give way.

My hon. Friend said something very decisive. He talked about gilt-edged, by which I understand he means 2½ per cent. Consols and 3½ per cent. War Loan. As a trustee, I was advised by bank trustee companies to invest in those securities, and they now have no edge at all, let alone gilt.

If my hon. Friend will allow me, I will come to that point a little later. That is, in fact, one of my objections to the Clause—that it will make it worse for him and others in his position.

In putting forward the Clause, the Government have abandoned the position taken by the Nathan Committee, the position taken by them in the White Paper and the position they took up on Second Reading when the Solicitor-General, with great emphasis, said that the fifty-fifty proportion was fundamental to the scheme and indicated that there could be no budging on that whatsoever whatever concessions he might make. Now he has given way.

The duty of the Government in the matters covered by the Bill is, first, to safeguard the value of Government securities and their ability to borrow money cheaply, and, secondly, to protect the beneficiaries of trust funds from unwise investments. It is true that the Economic Secretary has emphatically denied that the Government are at all concerned in the Bill with the first. I do not know why he should have denied it, because it is a perfectly right and proper thing to do; he should be concerned with the general public interest as well as the special interests involved However, if the hon. Gentleman was shy in being willing to accept so honourable an intention, that intention was, nevertheless, very clearly disclosed by my hon. Friend the Member for Gloucester on the Second Reading of the Bill, when he said:

"if the Bill goes through in its present form, limiting investment in equities to 50 per cent., there will be a certain effect on the price of Government securities and the ability of the Government to borrow."

implying, as he said earlier, that it would be an adverse effect.

My hon. Friend went on to say:

"If, on the other hand, it does not limit it to 50 per cent., there will be a further fall in the price of Government securities and the ability of the Government to borrow as cheaply as at present will be prejudiced. Those are the effects that follow from the Bill…"—[OFFICIAL REPORT, 26th January, 1961; Vol. 633, c. 391.]

I think that there are very few hon. Members who would be prepared to deny that those are the effects which will follow from the Bill and the effects which will follow still more sharply and adversely from the adoption of the new Clause and still more from the Amendments set down by my hon. and learned Friend the Member for Kettering (Mr. Mitchison). I am astonished that my hon. Friend the Member for Gloucester should desire to take a course of action in support of this new Clause which will have the effect he says it will have, namely, to lead to a further fall in Government securities and make it more difficult for the Government to borrow money cheaply.

The general economic policy of the Government is to blame for the fall in the value of Government securities and their inability to borrow money cheaply. They have pursued a deliberate policy of dear money, the paying out of high dividends, and of allowing people to speculate widely in property values, industrial shares, and the like. This, together with the effects of continuing inflation, has led to a serious fall in the value of what for the sake of convenience I call gilt-edged securities, in spite of what was said by my hon. Friend the Member for Oldham, West.

This is having a serious effect on a number of citizens in this country, and that effect will be made still worse if this new Clause is carried. I have a letter from one of my constituents, and I am sure that many hon. Members receive similar letters. The writer of this letter is a man of 86 with a wife of 82—

Order. I do not think that on this new Cause we can go in detail into the lamentable fate of holders of this stock. I think that the point can be validly made that gilt edge is not so gilt, but I do not think that one can go into a detailed discussion of the fate of 3½ per cent. War Loan.

I was putting forward the proposition, which I do not think is seriously contested, that the effect of the new Clause will be to make the position worse in this respect, that it will lead to a further fall in the value of gilt-edged securities and a further inability on the part of the Government to borrow easily and cheaply. I was going on to illustrate that point by giving an example of the difficulties experienced by a number of people, difficulties which will be made worse if the new Clause is accepted. Would I be in order in pursuing that a little further, Sir?

I might have stopped the hon. Member too soon. I was warning him that I did not think that we could go very far along the line of the woeful tale of the holders of 3£ per cent. War Loan without getting out of order. It is valid to say that the stock is so unattractive that the Government will have difficulty in borrowing again, but once that point is made I think that the limit is reached.

I respect your Ruling, Mr. Speaker. I will content myself with saying briefly that there are a number of people in this country who, like my constituent, are in an embarrassing and penurious position as a result of the fall in the value of the savings they have accumulated over a number of years.

Many people in that situation would like to apply for National Assistance, but they cannot do so because they cannot transfer their stocks into the type of stocks which are disregarded by the Assistance Board for assessment purposes, or cannot do so without experiencing a drastic fall in the value of their capital.

That is one aspect of the matter. It follows from this that the ability of the Government to borrow cheaply will be prejudiced by the same process, but there is another aspect of the matter, the one which the Government have acknowledged as being their responsibility, namely, the protection of the beneficiaries of trust funds from the consequences of unwise investment.

During the Second Reading debate the Economic Secretary acknowledged that certain risks were involved in allowing people to invest substantially in what is appropriately described as risk capital. Over the last two or three years good industrial equities have appreciated enormously in value—although during the last few weeks there has been a temporary decline—and this appears to be a process which, so long as the present Government are in power, is likely to continue even with slight "dawns" to balance some of the "ups".

This process may not continue all the time. In fact it is unlikely that it will, and it would be very unjust if it did, because, the present values of industrial equities are totally artificial and grossly inflated as a result of processes which are contrary to social justice and reason. They are inflated at the moment partly because of the fall in the value of gilt-edged securities, causing people to go into these other forms of investment. They are inflated because of the high profits which are being permitted by the Government; the high dividends which are being paid out with the approval of the Government; the fantastic increase in property values; and the speculative increase which is taking place without any effective opposition from the Government.

They are being inflated still more by the artificial scarcity value which has been given to good industrial shares as a result of the mad scramble of people to get into what is really a paradise for gamblers. The Stock Exchange today provides the perfect gamblers' paradise, a casino in which only a fool can lose and even a half-wit is bound to gain.

That situation ought not to continue, and it is unlikely to do so. A warning ought to be given to people who might wish to take action when this Bill becomes law. They should be warned that it would be very unwise indeed to make use of the powers which will be conferred on them if this new Clause is carried.

Suppose we had a Government—as we might well have in the not too far distant future—who introduced a severe tax on distributed profits and. Imposed dividend limitations when it was necessary to make an appeal for wage restraint. Suppose we had a Government that went further and introduced a capital gains tax and took drastic measures to ensure that capital gains were limited and that speculative increases in values were stopped or accrued to the community and not to private individuals. Suppose we had a Government who were determined to capitalise and channel savings into publicly worthwhile enterprises—

I am sorry to interrupt the hon. Member, but I have the interests of other hon. Members in mind. I quite understand that in connection with the new Clause it is a valid point to say that certain securities are inflated, and to make submissions about the period through which that state of inflation would endure, but we cannot make the discussion into a general expression of approval or disapproval of various financial and economic policies.

No, Mr. Speaker. Perhaps I went a little far in indicating approval or disapproval of the merits of certain policies, but I was trying to indicate what might happen in the future—a future which will affect the actions which could be taken by people under the provisions of the new Clause.

It is quite possible that in the near future we may have a Government which will take actions of this type, because they are actions approved by my right hon. Friends who have put their names down to the Amendments to the new Clause.

We are not right hon. Members.

I am sorry; I should have said my hon. Friends.

In any case, those actions are also approved by my right hon. Friends, one of whom is here today. Therefore, it is quite likely that it may happen, and that we shall create a situation in which these current inflated values of industrial shares collapse. It is only fair that that warning should be issued to people who may take action under the terms of the new Clause. They should be warned that it would be very unwise for them to follow the lax standards which have been permitted by the Government, and will be permitted still more if the Amendments to be moved by my hon. and learned Friend were adopted.

I hope that other hon. Friends of mine will oppose the new Clause, because if a situation arises in which this or any future Government are able to pursue an economic policy based on the channelling of savings into worthwhile enterprises at reasonably low rates of interest, the actions and standards laid down by the new Clause will set a pattern completely contradictory to such a policy.

I have some sympathy with the early part of the speech of the hon. Member for Ashfield (Mr. Warbey), although I would not wish to follow him in some of his wild excursions in the latter part. I do not agree with him that the Clause should not be accepted on the ground of its effects upon the value of War Loan. When we are considering these matters we treat what is fair and proper for those who are directly concerned in the value of War Loan as a separate policy. On the other hand, the new Clause appears to be based on the assumption that War Loan and other similar so-called gilt-edged securities are likely to continue indefinitely to fall in value.

I said that it was a less desirable form of investment. Nobody is saying that such securities will fall; we are merely saying that they will not rise, or keep pace with inflation to the extent that other types would, thereby benefiting beneficiaries accordingly.

The hon. Member is on record as expressing a totally different view from that. In Committee, he said:

"It is clear that there is a general feeling by everyone concerned with this matter that gilt-edged securities are likely to fall over a long period."—[OFFICIAL REPORT, Standing Committee B, 4th May, 1961, c. 501.]

I could hardly have expressed what he said more clearly or precisely.

The attitude of the Opposition—and also of the Government—is that the general tendency will be for gilt-edged securities to fall and equities to rise in value. In my opinion, we ought not to make that assumption. We should not base our policy on it, and for that reason I regret the introduction of the new Clause.

I want to express substantial agreement with what has been said by hon. Members on both sides of the House in the last few minutes, although I hope that my constituents will not accept my hon. Friend's precise description of Stock Exchange operations. I am not sure that I am a half-wit, or even a quarter-wit, but I have never met with any success in my limited excursions into the Stock Exchange. Therefore, I doubt whether my constituents will profit if they assume that they can operate there without any knowledge. Indeed, it is the exposition of explicit knowledge which is much more desirable in those operations.

I want to speak briefly, because I do not desire to obstruct the Bill in any way. I know that sometimes, in the interchange of ideas in our debates, we may say a lot about the difference in the effect of various party policies, but it is fundamental in this case, and what my hon. Friend the Member for Ashfield (Mr. Warbey) said is quite correct. I am not trying to make a polemical point; I am talking about trustee investments. I began to practise in 1923, when the postwar inflation was just about to come to an end, and I lived in a time when equities fell so rapidly that some drastic events followed.

I recall the case of one large estate, the administration of which, thank goodness, I had nothing to do with. It was a very substantial estate which, deprived of a reasonably rapid realisation after probate, was not then sufficient in value to pay the Estate Duty, and so became bankrupt, in the few weeks that had elapsed between the death and the granting of probate, because of the fall in the value of equities. These things happen.

In 1937 or 1938 banks were advising investment in 3½ per cent. Conversion Stock, and it was not then bad advice. Very few of us had realised what a disastrous effect could come from the absence of dating. I have never had much knowledge of these matters, and I do not now profess to have any specialised knowledge. I have rarely had any investments, and those that I have had have nearly all been bad, but so far as I recall there was no previous striking example of the fact that dating the redemption could produce such disastrous results as occurred in this period of a rise in the value of equities.

What worries me about Bills of this kind is that I have a feeling that they have been thought out in the City of London. I do not say that there is anything nefarious about it. I would not wish to use the old description of the City of London as the moneylenders of the world. I am merely pointing out the geographical position of London as the capital City of the Empire, which provides expert services in these matters and where advice is readily available. What happens in the little estate in the country, however, is that the trustees go to a solicitor and say, "We will leave it to you."

The average country solicitor is likely to have more things to think about than the value of equities, and he goes to the bank. Sometimes he is told, "Why not resign and transfer to our trustee investment department? Leave them to carry on. They have rather more expert advice." In general, he will take the advice which the bank gives him. He invests the estate as advised, and it will not be until about five years later—unless something drastic has happened economically, or a General Election has occurred—that he realises that 25 per cent. of the estate has gone, or that there has been an accretion.

12 noon.

This is really what happens and I do not see any way of avoiding it. It is for this reason, of course, that the whole of our law of trusteeship frowned on investment in equities where the trustee was liable to be the least well-informed person in connection with the operations of the company concerned. It really is true that my right hon. Friends are committed on this part of their policy—with my support—to a reduction of the interest rate. A reduction of the interest rate would inevitably, if it succeeded at all and allowing for the fact that the operation would involve some dangers—I am not trying to make a political point—mean a rise in what my hon. Friend, who is always a kindly man, calls gilt-edged and a fall in the value of equities. It would be almost inevitable.

However, it is not even limited by this. The result of the policy of this Government from time to time, whether they be right or wrong, wise or not, have had immense repercussions on the Stock Exchange. The coming of the bank squeeze meant that people whose overdrafts were secured by Government stocks were often forced to sell those stocks in order to realise the money with which to pay off the overdrafts at a price very much lower than the investment, although normally trustees would not, of course, be interested in overdrafts.

It is a wrong thing that when the bank squeeze comes along again trustees could be penalised in any event. Their difficulties are very great. The right hon. and learned Gentleman will, I know, recall one of the stories of the law about the articled clerk who was given a book on trusts and trusteeship to study. He studied it for six months and then his boss called him in for one of those interviews which are inevitable in such circumstances, and said to him, "How far have you got with the book?" The articled clerk replied, "I have come to the conclusion that only a fool would become a trustee, I certainly would not become one." The boss said to him, "You have mastered the matter."

One must also remember that, after all, if the testator is concerned about his investments, he has directive powers. If he wants investment in certain stocks he can authorise it. He can provide much wider powers on investment if he wishes to do so. He can give the trustees absolute discretion as to investment. Very often he gives a discretion to retain certain investments, and so on, and, provided the will is sufficiently clear, the testator's wishes can be carried out and the trustees can still apply their own caution to the matter in the exercise of discretionary powers.

The Bill goes further, and I suggest that if we are to lay down proportions we might well say three equities to one gilt-edged during a Conservative Government, three gilt-edged to one equity during a Socialist Government, fifty-fifty in the event of a Liberal Government, and no power at all to invest during a Communist Government, and thus have the matter covered. Otherwise, it means that trustees and solicitors will have to have a political liaison officer constantly reading the Press reports of Parliament to try to ascertain the Government's intentions regarding investments which they hold on behalf of widows, orphans, or the object of the trust.

I think it right that should say a word at this point upon certain matters—I shall be very brief—arising from the speeches made by my hon. Friend the Member for Ashfield (Mr. Warbey) and my hon. Friend the Member for Oldham, West (Mr. Hale). I think it is desirable that we should make it plain to my hon. Friends what has been in our minds in this connection having regard, among other things, to the kind of considerations to which my hon. Friend the Member for Ashfield has referred.

I thought that my hon. Friend spoke on this matter with great reasonableness and cogency, and I wish to make it quite clear that I agree with a great deal of what he says. I agree with him that the economic policies which have been pursued have contributed markedly to the movement of what we are, I think, calling for this purpose gilt edged. But I would ask him to remember that we do not regard it as following from the passing of the legislation now that it will, perhaps, have an ill effect on gilt-edged prices. We do not regard that as a necessary event.

What we are doing here is making an attempt in the Amendments which we have tabled, and the attitude we have taken up, within the limits imposed by the Bill, to help a particular class of person who is affected, and very sadly affected, in the way my hon. Friend has so reasonably and cogently described. After all, some of the people who are suffering from the movement of prices of gilt-edged stocks are trusts and beneficial trusts. My hon. Friend will have constituents of this class of person who are being adversely affected by this movement. I want him to realise that those of us who have been concerned in the matter are anxious, within the limits that the subject of the Bill imposes, to come to the assistance of a particular class of person who is suffering precisely in the way he has described. We cannot go further. Our interventions in this field have been designed with that purpose in mind.

In conclusion, I would say to my hon. Friend that he must also realise that any action to be taken by a trustee under the Bill is optional. A trustee is not required to take action. He need not do anything if he does not care so to do, but if he wants to take action which he thinks will have the effect of safeguarding or improving the prospects of the beneficiaries of his fund or of the cestui que trust, then he can take that action. We have been inclined to take the view, and do take the view, that the trustee should be given considerable liberty when he has come to a decision about the action which he should take.

Before my hon. and learned Friend sits down, I should like to put this to him. He said that his hon. Friends took the view that the Bill, and more particularly this new Clause, would not make the situation worse as far as gilt-edged securities were concerned, but I would remind him of the passage which I quoted from the speech of our hon. Friend the Member for Gloucester (Mr. Diamond), in which he said that the Bill, and, still more, the variations of the fifty-fifty relationship, would, in fact, lead to a situation in which there would be a further fall in gilt-edged securities and that the power of the Government to borrow cheaply would be prejudiced.

In reply to my hon. Friend, I would only say, first, that I do not admit that this will be the necessary consequence of the Bill. What I do say to the House and to my hon. Friend is that if that is a possible consequence, then for goodness' sake let us give trustees the opportunity, by provisions of this kind, to come to the assistance of beneficiaries and cestui que trusts who are likely in that event to suffer.

This Bill is likely to become law at some time later this year. At that time there may be a lot of funding going on in the steel industry and the yield there will be about 5 per cent. and 5½ per cent. and may well be attractive to trustees. Can the hon. and learned Gentleman give any assurance to trustees who are very likely to invest in these shares that they will be protected from people like the hon. Member for Ashfield (Mr. Warbey)?

Order. I think that shows that it is necessary to consider what the rules of order must be in this discussion.

This debate has ranged very wide, but I desire to make just three or four observations. First, I want to make it plain that the Bill is not erected on a basis of, and does not presuppose, a secular inflation causing a fall in gilt-edged and a rise in equities. As I pointed out on Second Reading, in a situation of economic growth, which is what all parties wish to see, the strong tendency will be a rise in equities without any inflation. It is because of that that the Bill is intended to give a new flexibility in the investment policies of trustees, so that the beneficiaries can take advantage of and participate in the country's economic growth.

Having said that, I find myself in complete agreement with the hon. Member for Ashfield (Mr. Warbey) when he emphasised that it is still risk capital, and it was for that reason that we built into, and still have built into, this Bill the fifty-fifty basis. When I pointed out that it was risk capital, I did not, because I wanted to avoid controversy on the Bill, link it to the naked exercise of political terrorisation that we have had from the hon. Gentleman, but even apart from political risks this necessarily remains risk capital in the wider-range part of the fund.

It is also true, as the hon. Member for Oldham, West (Mr. Hale) pointed out, that we must not be concerned only with large trustees, institutional trustees, in London. What we are concerned with is the whole mass of small trustees who may not, as the hon. Gentleman said, be able to call rapidly on expert advice. That is why we have this fundamental feature of the fifty-fifty basis.

Nevertheless, we saw that it was desirable to give a certain greater flexibility, which is what is done by this proposed new Clause. Whether the proportion of fifty-fifty shall be varied at any time will depend on the circumstances of the case and of the time, and a decision can be taken in the light of the prevailing and prognosticated circumstances. I therefore commend the new Clause to the House.

I beg to move, as an Amendment to the proposed Clause, in line 6, to leave out from the beginning to "as".

This Amendment seeks to leave out the limiting words which provide that the proportion shall not be greater than three to one.

Turning to the other Amendments which it has been agreed shall be taken with this one, that in the same line—to leave out "three" and to insert "ten"—is an alternative to the Amendment I have moved because it would substitute a limitation of ten to one which is, of course, a much wider limitation then the three-to-one limitation.

The next Amendment—in line 8, at the end to insert:

"and a proportion includes the proportion of one to nothing "—

really goes with the first Amendment, and provides for a proportion which the more mathematically inclined of us will suspect corresponds to infinity. The object of all these three Amendments is to extend the present prescribed limitation, or to remove it.

The next Amendment—in line 26, at end insert:

"(which may be greater than three to one)"

is related to a slightly different question. Subsection (4) of the new Clause provides that the Order may be revoked by a subsequent Order prescribing a greater proportion.

The right hon. and learned Gentleman, when speaking on the Clause itself, explained that that was not intended to be a proportion greater than three to one, but was to enable the Treasury if, finally, the proportion was to come down to three to one, to get there in stages and, perhaps, first prescribe two to one and then, by a subsequent Order, prescribe three to one. We, on the contrary, feel that there should be no limitation on the first Order so, a fortiori, there should be no limitation on a second Order, and that, at any rate, it should not be tied to the proportion of three to one. Those are the four Amendments we are now considering.

I am sorry that my hon. Friend the Member for Oldham, West (Mr. Hale) has left, because I want to say that in approaching this matter I feel very strongly that we have to do what we can to protect people who are the beneficiaries under comparatively small trusts, many of them arising out of a death and a will, and others arising out of simple marriage settlements and the like, and including, as in fact they do, some much larger trusts, because, when we come to a later part of the Bill, it will be found that the limitations we are now considering apply also to local authority investments.

I feel that in all these cases—but, perhaps, particularly in those of the smaller trusts—we are concerned to be fair to the trustees, and I would accept that the Government have endeavoured to do so without regard to any effect on the gilt-edged market. What effect there will be is a matter of judgment, and my own view, for what it is worth, is that the effect is not likely to be very great.

That, however, is not quite the point. These are usually people not well off, who will be landed with irredeemable War Loan, to give an example, and other Government stocks that have depreciated very severely. They should be given the opportunity to get out of those stocks if the only reason that they cannot get out of them is the terms of the trust.

It is the case, I think, that the great majority of recent trusts make much wider provision than even the law enjoins as the minimum, or as the Bill would allow but, assuming that there are no such provisions in these comparatively small and simple trusts, those are the people with whom we are particularly concerned.

One has in mind people like the constituent of my hon. Friend the Member for Ashfield (Mr. Warbey)—people with whom one has every sympathy—who found her funds tied up in 3½ per cent. War Loan, or whatever it was. There are many such people, and many of these trusts are cestui que trusts, not by virtue of any formal instrument but under wills, and we should try to be fair to them. It is because we on this side—indeed, I hope on both sides—are anxious to do what we can for these people that we have supported a considerable enlargement even of the terms of the B[11 and in the direction of giving people the opportunity to choose, if they so wish, to get out of the stock.

I agree that broader questions are involved, but one simple proposition that seems to be quite clear is that the law ought not to be such as it has been for some time; that people are compelled to keep the whole of a small trust in one particular form of security, because it is a Government security when they do not to—

I am obliged to my hon. and learned Friend for giving way. Is he aware that although my constituents most certainly want to get out of irredeemable War Loan, they do not want to get into industrial equities but into other Government securities and, in particular, into Defence Stocks, which would be disregarded by the National Assistance Board.

They are, of course, at liberty to do that under the law as it stands at present, unless there is some special provision to the contrary in the trust. Nothing in the Bill removes that liberty; they will remain just as much at liberty to do that as now. There are people who have a lot of money tied up in irredeemable or long-dated securities and want to get out and in some, although not all, cases they are only prevented from doing so by the present provisions.

When the hon. and learned Member says that they are only prevented from getting out by these provisions, it would be fair to say that to switch, for example, from 3½ per cent. War Loan to stock in I.C.I. would mean a loss of 50 per cent, income, and that is a strong deterrent.

I fully realise that. All we have been arguing is that on a division—and the Bill provides for divisions, although we may say it is not sufficient—people should be given the same opportunity to deal with their own investments, within reason, as a person who is not tied by the terms of a rather narrow Statute such as the present Trustee Act or by the investments which have followed. This is purely a question of whether we ought to allow people to look after their own affairs up to a point. There is nothing obligatory at all about this in the Bill or in the Clause.

Having made that preface, I suggest that it follows that there is no really good reason for limiting the power of the Treasury to make Orders under this Clause. We should have wished even more liberty for the trustees. I shall not repeat that, but at any rate the Government are conceding that the Treasury may make orders. It may make them once and may make them again and those Orders may vary the proportion. I have been somewhat critical in Committee of the Treasury's wisdom in dealing with investments. We may come to that later.

We hope they may be reasonably competent. In a matter of this sort I see no reason why the Treasury should not have the best interests of the trustees at heart. I do not think that under any Government the Treasury would exercise power-making powers in the interests of the gild-edged market or anything of that sort as against the interests of the cestue que trusts which we are considering here. Once we have given the Order-making power to the Treasury I think it unreasonable for us to assume that we are so certain of the future that we can limit that Order-making power to a particular proportion.

As my hon. Friends and others have pointed out, there have been many changes in the relation between these two types of investment and in the factors which would induce a prudent person to invest in one or the other. Surely no Government nowadays would be so arrogant as to claim that they know what the future contains in matters of this sort. As my hon. Friend the Member for Oldham, West so graphically said, this is a somewhat uncertain business. It is very much better that the judgment should be exercised in this matter by the Treasury at the time than that, on the one hand, we should give the Treasury some powers and, on the other, we should say that those powers must not exceed so-and-so.

Is there any really valid reason for putting a limitation on at all? This was not mentioned in Committee, but was put in subsequently. I do not think that Parliament, legislating for what might be a long period of years, ought to assume not only that it can prescribe a proportion now—I should not mind that so much—but that it can, whatever the circumstances may be, do so for ten or fifteen years' time. Then, we might have the Treasury making Orders putting in a proportion which may lead to considerable trouble.

That might lead to people who are not competent in the matter feeling that there ought to be a different proportion. They would be tied by the proportion in the Statute and find that this matter is not one at that time regarded by the Government of the day as of sufficient importance to justify amending legislation. That has frequently been the case over legislation about trustees. It is very much better to give a free hand in the matter. Ten to one is simply another way of doing it and getting a great deal nearer to giving a free hand. I shall not develop that argument, but my hon. Friends and I feel that it is wrong to fix this proportion for a period which may be quite long and to set ourselves up in Parliament today as the best judges of what ought to be done in what might be very different circumstances in the future.

For those reasons I have moved the Amendment and I should be interested to hear whether the Government will accept it.

This is a Clause of major interest and major principle. I was very interested in the words of the hon. and learned Member for Kettering (Mr. Mitchison), because I think he put the position very fairly, but there was one point to which he did not address himself. That is the invidious position in which the trustee finds himself.

By his nature the trustee has two responsibilities. He has a responsibility for the ultimate preservation of the capital for the benefit of the future heir and also a responsibility to do his best in the interim for the life tenant. I speak with considerable personal experience here. Those are responsibilities which almost invariably clash because of the natural expectation of the life tenant to get the maximum yield and of the heir for the protection of the capital.

This very morning I read in The Times the report of a case of a financial institution of great standing which was acting at the request of the beneficiaries and got itself into trouble as a trustee. I have no doubt that there would be many other such cases if the trustees were in a position to meet a claim. In this case the trustee was a bank and therefore it had a rather ugly judgment against it because ii did what the beneficiaries asked it to do. This surely suggests that we must do something to help the trustee or no one will be willing to act as a trustee.

The sort of position I have in mind is where the trust fund is invested mainly in some small family business. The business is a success and seems to be doing very well. Is the trustee to leave all the funds there? The beneficiary says "Yes", and it is very difficult for the trustee to resist that if Parliament does not give him some protection. It is most important that Parliament should say that there shall be a fixed proportion of the trust fund invested in the narrow list of investments.

I must make quite clear that there is no suggestion that by doing so the trustee has to invest in undated securities or in securities where there is no year of redemption date. They can invest in stock where there is a redemption date. I think it most important that we should not allow it to go out without the trustees accepting an obligation to invest a certain proportion of the fund in such a way as to guarantee the protection of the capital.

12.30 p.m.

At present there is a very small yield on equities and a very large yield on gilt-edged. I remember the time—I am sure that the hon. and learned Member for Kettering also remembers it—when the yield on gilt-edged was smaller than the yield on equities. Only in the last three years has the yield on gilt-edged fallen below that of equities. This will not be a permanent phase; it will be only a temporary one.

My hon. Friend said that the yield on gilt-edged had fallen below the yield on equities. I think that he meant that it has risen above it.

I am obliged to my right hon. and learned Friend for the correction. Naturally, I meant it the other way round. Historically speaking, the yield on gilt-edged was lower than that on equities. I am sure that we shall all live to see the day when that state of affairs comes about again. That is why I press the Government to resist the Amendment. After all, a trust fund is something of importance to us in this country. Very few countries have our trust laws. They have been of considerable value to us over the years and I should be sorry to see them go or pass into disrepute. I urge the Government to resist the Amendment and to insist that a reasonable proportion of trust funds should be kept in fixed-interest investments.

Why does the hon. Gentleman think that the Treasury cannot do this? If it can do it up to one to three, why not altogether?

I am sorry, but I have not taken the hon. and learned Gentleman's point. I say that we in this House should not pass the Bill without insisting that a substantial proportion of trust funds should be invested in the narrow range. The Treasury must be responsible for what it does subsequently.

I have listened carefully and with a certain amount of sympathy to the speech of the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid). Any matter relating to the Bill must be approached in the light of the new idea that trustees shall be given powers in addition to those which they possess at present. My experience is that usually, when one is drawing a trust instrument, if it is made clear to the person who is setting aside a sum of money or is making a will that it is possible for him to permit the trustees to use their sole discretion, the testator desires the trustees to have that discretion because he has faith in them. The trouble is that in many cases this possibility is not explained in detail to the person setting up the trust. Some people may say that they want to rely entirely on gilt-edged being preserved within that trust, which, in my experience, is an exceptional and unusual request. We know, however, that the court has power to vary the scope of investment in certain circumstances.

The Treasury has come forward, I think rightly, with the proposal that it should be given powers to make Orders to increase the proportion that shall be used for investment in equity securities. This is a very serious matter for the small investor or the small trust. The Government are not prepared to assist a person who has invested in gilt-edged, in Government stock, having been induced to do so by the Government because it is supposed to be a safe security, and who has lost a considerable amount of his capital as a result of the appeal which has thus been made to him to invest in gilt-edged.

I hesitate to interrupt the hon. Gentleman, Mr. Speaker, but it might be of some guidance to the Government spokesman who is to reply to the debate to know whether on an Amendment to increase the proportion from 75 per cent. to 90 or 100 per cent. it is in order to discuss whether undated stock should be redeemed.

I was waiting to see how the hon. Member for Leicester, North-West (Sir B. Janner) proposed to relate it to this suggested variation of the proportion. I was about to rise to interrupt him, but I am not certain that he is necessarily hopelessly out of order. I shall wait to see how his mental process proceeds.

I am obliged to you, Mr. Speaker for, so to speak, giving me the benefit of the doubt. I intended to put it in this way. In order to decide whether the Treasury should be entitled to allow a larger proportion or the whole amount to be invested in equities at some future time we must examine the present situation and know why it should be allowed to do so. The only way in which we can do that is by examining what is happening at present with regard to investments which trustees have made in gilt-edged as against equities. If we had an assurance from the Government that when there is a drastic fall such as that which has affected many of my constituents, who are writing to me almost every day—

We must keep away from the hon. Gentleman's constituents. The point, in so far as it is conceivably admissible on this Amendment, is made once it is asserted, "Unless Governments in future are going to give some foundation to stock of this kind, then it will be insecure". I do not think that we can go further into the lamentable results of its insecurity.

I cannot get away from my constituents. They will not and should not let me do so. That is why I wished to divulge the information which I have received from them. Naturally, I bow to your Ruling, Mr. Speaker. I think that you have put the point very much better than I could have done. I could not have used better words than those which you have used.

I should like to know from the Government what they propose to do, in the event of their utilising the proportion which is suggested, for those people affected in the manner which I have suggested. In my view, the present investment range of trustees must be extended.

The hon. Member for Walsall, South overlooked one point. The Bill provides that a trustee must take advice before making investments. There are certain restrictions in the Bill. A trustee cannot do whatever he likes. He has to take advice about how he should invest money entrusted to him. Consequently, there is the protection for the beneficiary that before the trustee alters the investments under the trust he has to take reasonable advice in a proper way. Therefore, his hands are tied in that respect.

Because of the profession which the hon. Gentleman adorns, he has much more experi- ence of taking advice than I have. However, does it not occur to him that in almost every suit which comes before the courts both sides have taken advice and that in each case one side has been wrongly advised?

I am reminded by that interruption of the person who decided to find a solicitor with only one arm, because his lawyer, when giving advice, always used the words, "On the one hand—and yet, on the other hand."

I am prepared to take the advice of the hon. Member for Walsall, South on this matter. Even though he sits on the other side of the House, I should trust him, if I appointed him trustee, to use his discretion in a way which would benefit the estate. I am sure that he would do so. If he can do so, then other trustees should be placed in a position, when advised in the manner imposed by the Bill, to invest accordingly.

There are other considerations. There is a later Amendment to enable municipal authorities to use further discretion. I am prepared to concede from time to time that the Treasury has wisdom, and if the Treasury is to be permitted to make Orders, then it should be permitted to make them, if not for the whole amount, at least for a very much larger proportion than is contemplated.

The Solicitor-General, who is the Government's spokesman on this occasion, is a reasonable man, and I hope that he will listen to reason and will recognise that what we propose would be not a step taken at random but a step taken after due consideration. I hope that he recognises that it is essential that the powers should be extended, otherwise an injustice will be done. He has gone a certain distance. I appeal to him to go much further. If he did, it would displease nobody in the House.

Like my hon. Friend the Member for Leicester, North-West (Sir B. Janner), I hope that the Government will have second thoughts about the lately-introduced limitation and will be prepared to expand it to infinity. It must be borne in mind that the Amendment is being introduced against the background of a Bill in which the existing freedom of trustees is being limited. I hope that the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) recognises that. Under the present law the trustee is free to invest in trustee investments according to what was then the understanding of a safe investment. That understanding has been brought up to date by the new law on what is a safe investment, and the only addition to the Bill is to put upon trustees the extra limitation and safeguard that they should take advice.

12.45 p.m.

Having moved from the position as it was under the 1925 Act to modernising and bringing up to date what is a safe investment, and having put upon the trustees the requirement that they should take full advice, why is it necessary to limit trustees even further, and, in particular, why is it necessary to limit trustees of a particular class, namely, by and large, those acting for old settlements and old trusts and those acting for small settlements and small trusts? If one is acting for a big trust, one can go to the court and obtain power to invest freely. We are here concerned only with the small settlement and trust.

Why is it necessary to impose this further limitation, and, in particular, why is it necessary for the Government to take power only to a limited extent? The Government do not promise to give effect to these powers. I very much hope that they will, and I rely completely on the Government's good faith that, having introduced a modification of this kind, they will, if they think fit, at a future time not hesitate to use it. But why should they limit themselves in such a way so that, when they feel it appropriate to use it, they can use it to only a limited extent?

Surely we are back on the old simple principle which was followed during the 1925 Act and all the practice which followed that: give discretion to the trustees to take all matters into consideration and to act accordingly. My hon. Friend the Member for Ashfield (Mr. Warbey) referred to some of my remarks. There is no dispute between my hon. Friend and myself, although there may seem to be on the surface. We are trying to give the same help to the small man as the big man already has, and I am sure that neither by nature nor by philosophical outlook does he object to that.

Let me remind him of what a very well-known solicitor said on this matter. He was a senior partner in a very large firm of London solicitors. He said, "In the course of about forty years of practice, I have made it a point always to advise that settlors and testators should leave the widest possible power of discretion to their trustees. My observation over a long period of time is that that advice was well-founded." That is a solicitor who bears the name of Lord Nathan, and I am quoting him as a solicitor.

My hon. Friend referred to a Report under the same noble Lord's chairmanship. That was a Report which did not refer directly to this matter. It referred to charities. One can well understand that a charitable trustee takes very much into account the fact that he is acting for a permanent beneficiary, the charity. His trust will most likely never be brought to an end. The conflict to which the hon. Member for Walsall, South refers is resolved in the case of a charity. This was somewhat a different matter. In any event, the consideration by that Committee was some ten years ago and can no longer be regarded as quite as up to date as it was at the time.

All hon. Members who attended our Committee meetings upstairs know that every solicitor present confirmed, as my hon. Friend the Member for Leicester, North-West has confirmed, that this is the normal professional advice given in every case—to give the greatest possible discretion to the trustees. As we know, in an old trust where there is limited discretion, all that happens is that the trustees go to the courts and in normal circumstances have their powers of discretion considerably widened. I assume that the Clause which we have later in the Bill, under which the courts are to pay no attention to what Parliament says—

I do not recognise it by that description.

Clause 13 is entitled "Saving for powers of court." It begins:

"The enlargement of the investment powers of trustees by this Act shall not lessen any power of a count to confer wider powers of investment on trustees…"

I assume that that power includes the wider powers given under this new Clause.

The hon. Member for Gloucester (Mr. Diamond) said that where trustees want wider powers, they simply go to the courts and have the trusts expanded automatically. What is true is that where all the beneficiaries agree they go to the courts and the court gives them the power. But if any one beneficiary objects, there is no application to the court and the powers are not given. None of us knows how many such cases there are. I suspect that there are very many such cases in which an elderly beneficiary objects and in which the powers are not given.

I can only echo the words of the hon. Baronet that none of us knows. It is unsafe, therefore, to make any allegations on that insecure foundation.

All I am saying is, quite simply, that the practice of trusts is well established. It is sound. It needs bringing up to date only in respect of what is now a safe investment as opposed to what used to be thought to be an unsafe investment. One does not need at this stage to develop what is not a safe investment. I am assuming in this connection that the later Amendment to Clause 5, page 4, line 44, at end insert:

"and

(c) to the risks inherent in long-dated or irredeemable securities, that is to say fixed interest securities, debentures, guaranteed or preference stock or shares, rentcharges, feu-farm rents, feu-duties or ground rents, as regards any of which the holder is not entitled to repayment of principal within twenty-five years from the date of investment"

will be called, Mr. Speaker, and that one can address remarks to you on it.

Yes, I am intending to -all that Amendment and others relating to it.

I am grateful, Mr. Speaker. Therefore, there is no point in commenting on that aspect at this stage, because there will be reasonable freedom to do so later.

I come back to my main point, that there is never, or there is rarely, justification for the Government limiting their powers in this way when they are only seeking to take powers to do something upon which they will require a confirmative Resolution by this House. If it were felt at the time that 87 per cent. was better than 75 per cent., the Govern- meat would surely feel it a pity that they had not given themselves that further discretion. The Government are not making an Order at the moment. They are merely taking power to bring an Order before the House in due course.

Secondly, one has the full protection of the existing Trustee Investment Act and the procedure and practice under it, as well as the additional protection that the trustee is compelled to seek advice. All that these Amendments do is to restore the position that a trustee has to look at all aspects of the matter, in the long-term interest of whoever succeeds to the property of the trust and the shorter-term interest of whoever is getting the benefit as a life tenant. There will be freedom to do that and to invest wholly in gilt-edged or not at all in gilt-edged depending upon the terms of the trust and the terms of the trustee's responsibility and the advice which he has given.

The Amendment raises a narrow point. What the Government have done in the Bill is to give a greater flexibility for the investment of trust funds. Apart from some hesitation by my hon. Friend the Member for Hendon, South (Sir H. Lucas-Tooth) and the hon. Member for Ash-field (Mr. Warbey), that has met with universal approbation.

The new Clause which the Government have introduced gives a greater flexibility in response to the considerations that were urged in Committee, and allows the Treasury, by Order approved by affirmative Resolution of the House, to fix a higher proportion for the basic relationship of the wider-range part and the narrower-range part to alter it from fifty-fifty to seventy-five-twenty-five. What the Amendments seek to do is to say that either that proportion should be ninety-ten, or that there should be no limit at all.

Powerful considerations have been urged today in an earlier debate by the hon. Member for Ashfield and the hon. Member for Oldham, West (Mr. Hale) for preserving a basic element of gilt-edged, a basic element of narrower-range investments. That was powerfully reinforced in the speech on the Amendment by my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid). All those are general arguments in favour of retaining the basic element of the investment of gilt-edged. With great respect to the hon. Member for Leicester, North-West (Sir B. Janner), the question of the redemption of undated stock has nothing whatever to do with any of these considerations.

rose—

The hon. Member has made his speech and I am pointing out to him how fallacious it was.

There is a case for giving greater flexibility whether or not undated stock exists and whether or not a date is given for its redemption. There are many other gilt-edged securities in the trustee list. The House feels, nevertheless, that there should be wider ranges of investments. It has nothing to do with the existence or the redemption of undated stock, nor has it anything to do with whether one has a higher proportion, 75 per cent. or 100 per cent. All that has nothing to do with this issue. It is a question of whether the Treasury shall have power to fix a higher proportion than 75 per cent.

On a point of order—

It is not a point of order.

How does the right hon. and learned Gentleman know that it is not a point of order until he hears it? I know that he has a great amount of genius—

We may pass the compliments by. Either this is a point of order, in which event I should like to hear what it is, or the hon. Member should not be on his feet. What is the point of order?

May I ask for your Ruling, Mr. Speaker? You permitted me to make the point I was making. The Solicitor-General now states that it was entirely out of order.

No.

He said so. He said that it had nothing to do with the Amendment. Therefore, if it had nothing to do with the Amendment, it was out of order. I suggest that it was in order.

If the right hon. and learned Gentleman wishes to criticise my Ruling he must take proper steps, otherwise he would be out of order. What the Solicitor-General has said is that the hon. Gentleman's speech was fallacious. That may or may not be right, but there is no need to rise to a point of order.

I knew that it would not be a point of order and, therefore, I was prepared to give way to the hon. Gentleman, as I always should wish to do, but I wanted to finish the argument I was advancing.

The second argument which has been put forward is that advanced by the hon. Member for Gloucester (Mr. Diamond), who asked why we should differentiate in this respect between the small man and the big man. It is perfectly true that the big trust can go to the court. On the other hand, as pointed out by my hon. Friend the Member for Hendon, South, it does not necessarily follow, nor does it, in fact, follow, that on going to the court one gets investment powers of up to 100 per cent. in equities. Certainly in the case of charities that has not been necessarily the case. In addition to that, however, the answer to the hon. Member's argument was given by his hon. Friend the Member for Oldham, West—that in the case of the small trustee, and particularly the small trustee all over the provinces, he is not in the same position as the big trustee to call on rapid and expert advice.

In the end, what we come down to is whether there should be power by Treasury Order to prescribe a higher proportion than 75 per cent. We felt it right to go as far as we could to meet the arguments that were put forward in Committee. The reason why we stopped at 75 per cent. was quite simply a constitutional consideration. The fifty-fifty basis, as modified as we suggest, is linked with a whole number of other safeguards in the Bill. We felt that it would be proper to reduce the basic gilt-edged element by Treasury Order to as low as 25 per cent. If we go beyond that, a new situation has arisen in which Parliament as a whole should be able to express its view, not merely by an affirmative Resolution, which cannot be amended.

1.0 p.m.

As I say, this fifty-fifty basic element, or the basic element generally, is linked with a whole number of other safeguards, a whole number of other considerations. If we are going on to a completely new basis at 90 per cent.—or still more, 100 per cent.—Parliament ought to be able to consider it in the light of all the circumstances, debate it carefully and consider it at leisure.

One has only to think of the history of this Bill. It was debated at length in another place. We spent 12 sittings in it on Committee, and it emerged from the Committee, as the hon. and learned Gentleman said, a very different Bill and, I freely admit, a very much improved Bill from the form in which it went in. If we consider the very great care which has been lavished on the Bill and the very great changes which have been made in it, I suggest to the House that we were right to bear in mind the constitutional consideration that a further change so momentous, which alters the very foundation of this Bill, ought to be the subject of full-scale legislation and not merely a Resolution of the House, possibly taken unamended or unamendable after ten o'clock at night.

The question is here, as the right hon. and learned Gentleman has just said, a simple one, but we regard it as of some importance. Put very shortly, it is this. Is Parliament now to decide a somewhat technical financial question of this sort for a number of years ahead, or are we content to allow the Treasury to make the decision at the time subject to parliamentary approval? We regard the Government's attitude, if I may borrow a phrase from my hon. Friend the Member for Leicester, North-West (Sir B. Janner), as a two-one argument and we propose to divide.

I had not intended to speak on the Amendment to the proposed Clause, as I spoke before on the Clause, but I had not anticipated that my hon. Friends were proposing to divide the House on the Amendment. Therefore, I must intervene to say that I cannot follow them in taking this line, for reasons which I gave earlier, as I think that these Amendments are unwise.

I would take the opportunity of replying to a point made by my hon. Friend the Member for Gloucester (Mr. Diamond), when he said that all that he and his hon. Friends are seeking to do is to give powers to the small man which already exist for the big man. That really is not the case, especially in regard to the Amendment to increase the range for industrial equities up to 100 per cent., because, as the Solicitor-General has indicated, the courts will not necessarily give to trustees responsible for big trusts such wide-ranging powers as are sought by my hon. Friends.

If this power were to be put into the Bill, although the courts cannot take notice officially of the Bill in deciding matters brought before them by trustees, nevertheless it is bound to set a new pattern, and a new pattern of which the courts would inevitably take notice in coming to their decisions. That would open the door not only for small men, but for big men as well, to be able to invest all their investments quite freely in industrial equities and to ignore gilt- edged securities altogether. For that reason I feel that the House ought not to accept this Amendment.

I beg to move, as an Amendment to the proposed Clause, in line 12, to leave out from "order" to the end of line 13.

I very much hope that the Government may offer the concession that we ask for in the Amendment. It relates to the Treasury Order which is dealt with in the new Clause now under discussion. As I understand, an Order by way of Statutory Instrument, which alters the proportion of wider-range investments made to the narrower-range investments, will presumably be made having regard to the economic situation at the time and market trends and a whole lot of other relevant factors.

Presumably, the Order thus made by the Treasury will remain in force while those trends are regarded as justifying it. One asks, therefore, what is the sense and reason behind the twelve months' limitation that is imposed. While the provisions of the Order are current, it would seem reasonable and appropriate that it should be possible to make, in this case, the second division of the trust fund.

1.15 p.m.

I would ask the Government that where a first division of the fund takes place after the making of a Treasury Order it can be carried out at any time during the currency of the Order. Why should there be this differentiation between the first and second divisions of a fund during the currency of the Order?

It does not seem readily defensible. I hope that the Government will be able to make the small concession asked for here and thereby simplify to some extent and improve the proposals in the new Clause.

We have always recognised that for some reason or another—and we had in mind reasons of a temporary nature—the trustee might wish to postpone the division of a fund and we thought that a year's grace would be sufficient to meet this kind of temporary difficulty. On the other hand, there is no objection, in principle, to trustees taking advantage of an Order to make a redivision at any time during the lifetime of the Order. Having listened to what the hon. and learned Member has said, I think that it will be as well if the House will accept the Amendment and I advise it to do so.

I beg to move, in page 3, line 3, at the end to insert:

"; and paragraph (a) of this subsection shall not include the case of a dividend or interest becoming part of a trust fund".

This is a very little more than a drafting Amendment to put right what I frankly admit to be an error which we made in an Amendment accepted in Standing Committee. Frequently, dividends and interests on investments comprised in a trust fund are handed over to the beneficiary or otherwise disposed of and do not become part of the trust fund, but in some circumstances either the income is not wholly spent or the trustees are called upon to accumulate the income as it arises as capital. The intention always has been from the outset that such income should be treated as a fresh accrual of capital to be divided equally between the two parts of the trust fund.

As Clause 2 (3) was presented to the House on Second Reading and to the Standing Committee, this result was achieved and, although I do not remember a specific reference to it, I think that it is fair to say that it was implicitly accepted by hon. Members. In other words, accruing income did not fall within subsection (3, a) as drafted because, if I may use the words in the subsection then, the income did not accrue

"… by reason of the exercise of any right or remedy arising from the ownership of property.…"

It will be recalled that an Amendment was made to subsection (3) in Committee and particularly to paragraph (a), which now reads:

"if the property accrues to the trustee as owner or former owner of property comprised in either part of the fund, it shall be treated as belonging to that part of the fund;"

Those words will cause accrued income to come to that part of the fund which gives rise to it.

The Amendment puts the matter right. In other words, it restores the position to what it was when the Bill originally came to the House of Commons and it avoids the inadvertent alteration in this aspect which was made by the Amendment that I moved in Committee.

If paragraph (a) of the subsection is not to include the case of the dividend or interest becoming part of the trust fund, It would seem to follow that paragraph (b) does so include. That interpretation of the Amendment has been confirmed by the Economic Secretary and this means, as I understand it, that when a dividend or interest income comes to the trust fund there then follows the process of apportionment or transfer contemplated in subsection (3).

I think it right to raise one point which arises from that proposal. Why is interest, accruing to the fund in this fashion and setting on foot the process of transfer and apportionment which the Bill contemplates, distinguished in this way from property acquired in consideration of a money payment dealt with in the subsequent passages in the subsection under consideration? It is difficult, for me at, any rate, to discover the logical reason for this.

The House is well aware that in recent weeks there have been several examples of rights issues being made where shareholders owning shares worth up to £8 or more are given rights to buy three new shares for every one share held and to buy those new shares at par, which, in this instance, may be as little as 5s. a share. What is it that justifies so important an accretion of value to a fund, such as I have referred to, being permitted to attach itself to the appropriate range of investment without apportionment or transfer and, at the same time, being regarded by the Government as justifying this relatively meticulous treatment of dividend and interest accruing to the trust fund?

I am not sure whether this provision which my hon. Friend now seeks to insert in the Bill affects the special range of property in the next Clause. Supposing the dividend arise from the special range property, is one to apply subsection (3) and all its apportionment and division, or does it accrue to the special range property? It seems to me that this Amendment not only affects what I would call the Bill powers, but also the special powers under Clause 3.

I will deal in turn with the three points raised. On the two points raised by the hon. and learned Member for Liverpool, Edge Hill (Mr. A. J. Irvine), he stated clearly the purpose of the Amendment in that it excludes dividends and interest from the ambit of paragraph (a) and brings them into paragraph (b). He went on to say, "Does not this mean that this will involve apportionments and transfers contemplated in paragraph (b) in the case of all dividends and interest which become part of the trust fund?".

I would first say that this applies only in a case where the dividend or interest becomes part of the trust fund. I am advised that in the case where the income is being paid out, although it comes under the control of the trustees, it does not become part of the trust fund. Consequently, the division here required would not be required in that type of case.

With regard to the question of transfers, as dividends and interest come normally in the form of money, I cannot at the moment contemplate that transfers would be necessary, because it would be a straight apportionment, or a straight split, as between the two sides. In the normal case income is accumulated as capital and assuming—though I know hon. Members differ on this—that we are right in the basic principles embodied in the Bill of providing for a division, I think that it would follow logically that one should divide the dividends and interest which arise to the fund and which are to be accumulated as part of the capital of the fund.

Does this not distinguish between the temporary collection of the income awaiting dispersal under the trust and a long-term accumulation of money which comes in as income but takes on the nature of capital because it is not to be distributed as income?

Broadly what the hon. Gentleman has said is right. Perhaps I may be a little more precise. I should prefer to rely on the words of the Amendment. In other words, it applies only where the dividend or interest becomes part of a trust fund. I agree that what the hon. Gentleman said was broadly to the same effect.

As to the hon. and learned Gentleman's second question concerning the concluding words of subsection (3) which deals with the case of a trustee acquiring property in consideration of a money payment, we discussed this in Committee and the basic reason why the property referred to there is treated in the way it is to be is simply because, in our view, it is more analogous to a normal type of investment. That being so, we felt that it should be treated as such and not as an accrual of property to the trust fund. Whether the hon. and learned Gentleman agrees with that or not, this is the reasoning which caused us to include that provision at the end of subsection (3). Perhaps my hon. Friend the Member for Crosby (Mr. Graham Page) would be good enough to remind me of his question.

When a dividend arises from special range property covered by Clause 3, does that have to undergo the operation of apportionment and so on under Clause 2 (3)?

I hope that my hon. Friend will allow me to reply by saying that this provision will cover the case of any dividend or any interest which becomes part of a trust fund where the fund has been divided in pursuance of Clause 2 (1). I should not like without notice to consider the circumstances of a particular case where a trustee has special powers to invest, or to say off the cuff whether or not in those circumstances the Amendment would apply to a case like that. It is a general Amendment, but application is governed by the opening words of subsection (3) which refer to property accruing to a fund after the fund has been divided in pursuance of subsection (1).

In other words, the Amendment would have no application to the case of a trust which included a special power of investment, the trustee relying solely on that special power to invest. On the other hand, if the trustee wished to take advantage of the additional powers of investment given in the Bill and, consequently, to operate both the special powers of investment and the powers given in the Bill, at any rate to some extent, the Amendment would apply. However, I am sure that my hon. Friend will forgive me if at this juncture I do not give an off-the-cuff answer to his specific question, because at this stage of the Bill I should not like to take the risk of misleading those who might have to follow what I am saying.

This sounds quite interesting. Is some arrangement to be made for the answer to be put into HANSARD in some form or other, and not confined to a secret missive from the Government to the hon. Member for Crosby (Mr. Graham Page)?

My hon. Friend has answered the question quite satisfactorily and I think that a dividend of this sort does become apportionable under subsection (3).

I beg to move, in page 3, line 39, at the end to insert:

"or

(c) by an enactment contained in a local Act of the present Session".

Clause 3 (4) provides that where, for example, a local authority has enlarged its powers of investment by enactment in the ten years prior to the passing of the Bill, those powers shall not be allowed to accumulate with the powers of investment granted under the Bill. Instead, a limited accumulation will be allowed in accordance with the Third Schedule.

A few local and Private Bills lodged at the beginning of the Session provided for such a widening of investment powers, and the Amendment will bring those Bills within subsection (4). I am sure that the House will take the view that that is the right way to deal with those Bills, and I therefore commend the Amendment to the House.

I beg to move, in page 4, line 26, to leave out subsection (4) and to insert:

(4) In the application of this section to Scotland the following subsection shall be substituted for subsection (1) thereof:—

"(1) In this Act 'property' includes property of any description (whether heritable or movable, corporeal or incorporeal) which is presently enjoyable, but does not include a future interest, whether vested or contingent."

When this subsection was considered in Committee, the hon. and learned Member for Kettering (Mr. Mitchison) made some slightly rude noises about it, and the first reason for the Amendment is to meet his criticism. He did not quite say that it was unintelligible, but he came very near to doing so. We have redrafted it to make it clear, we hope.

There is a further point—I confess that it is my fault—in that we had a defect in it in as much as the prospective interests which were excluded from the term "property" were not widely enough defined, in as much as they did not exclude a vested interest which had not in the English term "fallen into possession." It is only to make sure that it is what has fallen into possession which comes within the definition that we have made the Amendment.

I welcome the right hon. and learned Gentleman's correction of his own error, coupled as it is with the concession to the limitations of my own intelligence.

I beg to move, in page 4, line 37, to leave out from "for" to end of line 41 and to insert:

"diversification of investments of the trust, in so far as is appropriate to the circumstances of the trust."

If the House accepts the Amendment, the opening words of Clause 5 (1) will read as follows:

"In the exercise of his powers of investment a trustee shall have regard—

(a) to the need for diversification of investments of the trust, in so far as is appropriate to the circumstances of the trust."

The Amendment arises from an undertaking which I gave in Committee during a discussion of an Amendment which sought to delete paragraph (a). I then said that while I felt strongly that there should be a reference in the Bill to the duties of trustees on diversification and suitability, in the light of what had been said on both sides of the Committee, I wished to see whether we could improve the drafting. In particular, I wanted to meet points which were made by two hon. Members. The first was that the existing paragraph (a) might cause trustees to diversify existing investments, contrary to the interests of the beneficiaries of a trust.

The second was that the paragraph might require a trustee of a relatively small trust to diversify investments in an impracticable and unnecessary manner. The Amendment meets both points. It is an improvement and it is a good example of an Amendment which will not have a very extensive effect but which will nevertheless be an improvement to the Bill. It is the direct result of points which were raised on both both sides of the Committee.

The original paragraph was too complicated and I welcome the Amendment.

I rise to do little more than ask a question and seek an assurance. I recognise that the Amendment was put down to meet issues raised in Committee, but I have rather a different matter to raise. Am I right in thinking that there is nothing in the wording of the Amendment or in the original wording of the Clause which could over-ride the provisions of a trust deed? If, for example, a trust deed lays down the pattern of investment, am I right in thinking that it will not be disturbed in any way by either the Amendment or the Bill by anything that may be said about diversification of investment?

For example, some businesses have superannuation funds which are required or at least permitted to be invested within the business. I am fairly confident that my understanding is correct and that that situation would not be disturbed by the Bill or the Amendment, but if the Economic Secretary agrees with me that there is no change which could over-ride a trust deed or disturb the investment of a superannuation fund, I should like to have it placed on the record.

Subsection (1) of Clause 5 is, as the hon. Gentleman appreciates, a general provision, whereas the subsections which follow are concerned with the exercise of powers under the Bill. But despite the fact that this is a general provision, the position is that, if a trustee is given particular powers of investment and, in particular, is authorised to make investments in a particular manner—for example, if it is explicitly stated that he is under no obligation to take advice—then the provisions of the trust fund will override subsection (1) which, in effect, as I explained in detail in Committee, does little more than codify what we understand to be the existing law.

Consequently, it is really a question of interpretation of trust instruments. If nothing is said, then this subsection will apply. If some other rule is laid down by the testator, that rule will prevail.

I beg to move, in page 4, line 44, at end to insert:

"and

(c) to the risks inherent in long-dated or irredeemable securities, that is to say fixed interest securities, debentures, guaranteed or preference stock or shares, rent-charges. feu-farm rents, feu-duties or ground rents, as regards any of which the holder is not entitled to repayment of principal within twenty-five years from the date of investment".

Perhaps it would be convenient also to discuss the other Amendment to Clause 5 in the name of the hon. and learned Member for Kettering (Mr. Mitchison) and his two Amendments to the First Schedule, in pages 11 and 12.

I am not sure that I follow that, Mr. Deputy-Speaker.

I suggested that we should also discuss with this Amendment the hon. and learned Gentleman's other Amendment to Clause 5 and also his two Amendments the First Schedule, in pages 11 and 12.

With respect, I think that those other Amendments raise different points. I would rather take this Amendment separately, if I may.

The hon. and learned Gentleman may do so if he wishes.

I think that I can explain why I regard them as different matters.

The effect of this Amendment is to oblige a trustee to have regard to the risks inherent in long-dated or irredeemable securities. It includes a list of such securities and what amounts to a freezing of them—cases where the holder is not entitled to repayment of the principal within twenty-five years from the date of investment.

This is, of course, no more than a statement of what a trustee should have regard to. The trouble about subsection (1) as a whole is that it applies, as the Economic Secretary has just said, to all trusts, and it selects two particular things which are to be considered by a trustee. One, in paragraph (b), I calf diversification. The other, in paragraph (b), is

"… the suitability to the trust of investments of the description of investments proposed and of the investment proposed as an investment of that description."

These words are somewhat vague. I agree that they could be taken to include the particular risks I am referring to in this Amendment, but I suggest to the Government that it is as well, if we are listing things which trustees should have regard to, to mention these particular cases. We should do so because of the history of the matter and of the facts at present.

We all know the difficulty—arising in so many cases where a fund, or too much of it, has been invested in long-dated or irredeemable securities—which is caused by the change in values that has taken place in recent years. I suppose that, in the comparatively peaceful atmosphere at present prevailing, I must not say too much about the financial policy of the Government, but with that change there has been a fall in the value of these long-dated securities.

1.45 p.m.

It is the kind of case which my hon. Friend the Member for Ashfield (Mr. Warbey) mentioned. We all of us know many instances-3½ per cent. War Loan is one that is very much in people's minds now, but there are many others, and, later, we shall come, I hope, to a particular case where the Government themselves have got caught very badly. It is surely right, particularly when we are prescribing something intended to have special relation to the smaller trusts, to put in something to refer to these risks. This Amendment does no more than that. It does not impose any other obligation except simply to have regard to these risks. I feel that this is one of that class of Amendments which cannot possibly do any harm and which ought to be an advantage.

It is true that people do not read Acts of Parliament. None the less, these Acts are binding on them, and if one mentions in this subsection a couple of things—one of them as vague as paragraph (b) and the other a particular matter only slightly connected with this—it is reasonable to mention this particular case, and to do so having regard to the difficulties we all know so many trustees have met in connection with these risks.

I do not need to go through the list. I have simply taken words from the First Schedule. Feu duties, ground rents, and so on, carry the same risks as long-dated debentures or anything of that sort. If this were an imperative Clause which called for a particular action, one might have to look at this question of the date of repayment a little more closely. When it is simply a question of calling the attention of trustees to risks, I suggest that this is sufficient.

As the hon. and learned Gentleman pointed out, this Amendment would require trustees, whether they were exercising powers of investment conferred by the Bill or not, as well as having regard to the needs for diversification of investments in the amended paragraph (a), to have regard also to the suitability of the investments as referred to in paragraph (b), and also to what he calls the risks inherent in long-dated and irredeemable securities. He has explained what he means generally by the terms in his Amendment.

The Amendment is, once again, an attempt by the hon. and learned Gentleman, for reasons which I well understand, to provide protection in the Bill against making unsuitable investments in long-dated or irredeemable securities. But to acknowledge the need for this is really to accept that there is some special risk attached to investments in these securities for which the law ought to provide. For example, in guaranteed stock or preference shares, or as he said, 3½ per cent. War Loan. These would all be covered by the Amendment.

Securities of this kind are, in some circumstances, perfectly suitable investments for trustees. There is always a risk involved in making investments, particularly if the wrong ones; are chosen, and there is a risk in making investments in equities in certain unsuitable circumstances—for example, when capital has to be realised at very short notice.

There is always some risk in equity investment at any time, but to draw the attention of trustees particularly to investment in long-dated or irredeemable securities would, I think, be to overstate any risk in relation to that inherent in other investments, particularly in equities. I appreciate the point which the hon. and learned Gentleman has in mind. Indeed, some of the considerations to which he referred are considerations which should have great weight in the minds of any trustee. But this matter is covered in Clause 5 (1, b). The hon. and learned Gentleman described that as vague, but, after all, it says quite specifically that in the exercise of his powers of investment a trustee shall have regard

"to the suitability to the trust of"

the investments which he proposes to make.

These are not meaningless words. They cover the circumstances referred to by the hon. and learned Gentleman. As I say, while it would certainly be possible to go on and add paragraphs to subsection (1) to provide that various other aspects of investment should be taken into account and that all these should be specified in the Bill, what I think would be wrong would be to refer in terms to the particular matters which are contained in the hon. and learned Gentleman's Amendment. I think that it is much better, unless one is going into far greater detail concerning the matters which a trustee must bear in mind in making investments, to rely on the general provision in paragraph (6). I hope that, with that explanation, the hon. and learned Gentleman will not feel it necessary to press his Amendment to a Division.

I do not think that the Economic Secretary is fully aware of the point which my hon. and learned Friend the Member for Kettering (Mr. Mitchison) was making. It is not adequately included in paragraph (b), nor are we dealing with the question whether, having given the matter careful thought, there might not be a case for investing in long-term securities.

The Economic Secretary said that there might be suitable cases for investing in the investments referred to in the Amendment. Of course, there might be. My hon. and learned Friend did not say that there never could be. All we are saying is that there is a special need in present-day circumstances, as opposed to the provisions of the Trustee Act, to draw the attention of trustees to certain factors. That is admitted in paragraphs (a) and (b).

We are saying that paragraphs (a) and (b) do not go far enough, because it is quite obvious that a new element has arisen, namely, the appreciation on the part of very many trustees that there are special risks inherent in this kind of investment. I need not go into those risks, for they are obvious to all of us. If every trustee were automatically aware of this, there would perhaps be no need to mention them—perhaps—but I am quite satisfied that there is a need. One has only to listen to what has been said even here today, and certainly to what was said in Committee from time to time. That is sufficient for me, at all events, to take the view that not even every on. Member in the House is sufficiently aware of the risks inherent in this kind of investment, and, certainly, trustees outside the House would not, by and large, be sufficiently aware of it.

The Economic Secretary has said that one of the reasons why he believes in breaching the principle of giving trustees full discretion is that trustees in the provinces would not be able to command immediately adequate or satisfactory advice of the kind that a trustee in London can get. I do not accept that completely, but if the hon. Gentleman thinks that that is so, he should surely agree with my hon. and learned Friend that there are a number of trustees whose attention should be specially directed to the problems of this kind of investment. Without this addition to the Bill, they will not have their attention directed to them.

I do not know whether the Economic Secretary was merely complaining that to use the precise words about risks inherent was to overstate the position and, therefore, he was not prepared to accept the Amendment on those lines. I cannot speak for my hon. and learned Friend, but I dare say that he takes the view that, more important than stressing that there are risks inherent, he wants the attention of trustees drawn to the problems of this kind of investment, and that they shall be given full consideration.

There are these problems, and they are very real problems. It does not hurt anyone to have this provision in the Bill, though perhaps not precisely these words if the Economic Secretary prefers less precise or, if one likes, less damaging words about risk. It would not hurt anybody in the slightest, and it would not damage the principle of the Government's Bill, so far as there is a principle. It does not affect the question of dividing trust funds, or the kind of securities in which a trustee should be allowed to invest. It merely invites trustees to give attention to matters to which they should give attention.

I repeat that it is not adequate to refer to either paragraph (a) or paragraph (b), because new paragraph (a) deals with diversification and old paragraph (b) deals with the suitability of trust investments and people would look at the kind of investment in relation to an investment of that description. I think that it is very necessary to draw attention to the fact that beyond those two very wise pieces of advice there is this further advice necessary. I hope, therefore, that the Economic Secretary will go further and will be prepared to accept an Amendment on the lines of this one.

I wonder what would have been the reaction if, instead of discussing this matter in 1961, we had discussed it fifteen years ago, in 1946, when Lord Dalton was so actively engaged in his conversion campaign that he succeeded in paying off the 3 per cent. Local Loan Stock at par by a general rise in fixed interest investments. At that time, trustees everywhere were looking for stocks which could not be paid off. When they were looking for such stocks, there were special advantages in long-dated stocks. For example, the 3½ per cent. War Loan had a special advantage in those years because it could not be paid off before 1952. For that very reason it went to quite a substantial premium.

Fifteen years may be a long time in parliamentary history, but it is short in human history, and certainly short in the history of this country. We are, I think, trying to legislate on a permanent basis, and, therefore, I feel that there would be more force in the arguments adduced by the hon. Member for Gloucester (Mr. Diamond) if he had called attention not only to the risks, but also to the advantages of the long-term investment. If he wishes to see a totally neutral Clause in the Bill, I suggest that he has not given sufficient validity to the judgment of trustees and their advisers.

It is an unfortunate thing that thought about investment is as much governed by fashion as any article of women's wear, and it would be quite a mistake for us in this House, where we are trying to create an article which will survive the vagaries of fashion, to put in something which at present seems valid, but which is an expression of a temporary nature.

For that reason, I hope that my hon. Friend will resist the Amendment

The reason for referring to these risks is that on the basis of the history of the matter, and principally, of course, on the basis of recent history, these are the risks which have been overlooked. It is perfectly true that there are risks in equities, but they are much better known and better realised. There are still far too many people who think that their money will be perfectly safe if they put it into Government stock.

The hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) is right. The position was very different a little time ago. It is since the change in financial policy brought about by successive Tory Governments, resulting in higher Bank Rates and higher interest rates, and so on, that these long-dated and irredeemable stocks have depreciated so heavily.

The other day I had the curiosity to look at the history of the irredeemable War Loan. When the Tory Government came in it was round about par, but the depreciation since then has been severe. I am not arguing about the merits or demerits of that financial policy. I have had something to say about it on other occasions, but it has been the result of a change of Government and a change of Government policy.

At the moment it is the trap which has caught most people. That is the reason for putting in that risk, but there is another reason. If one looks at the Schedules, the totality of which comprise all the investments which a trustee can make in the exercise of powers under this Bill, one gets quite a number of limitations on the purchase of equities, limitations by the amount of capital, the amount of dividend, and so on.

I agree that this subsection does not apply only to trustees acting under the powers of this Bill, but applies to trustees generally. I think that it is a pretty clear indication that the character of the risk in equities is much better understood than the character of the risk in these long-dated and irredeemable securities. I would say that it was particularly a sort of small provincial point, that is to say, people who are investing under smallish wills and so on in industrial towns in the North, who are a little too liable to put too much into this type of security. I should have thought that the Government would have done no harm by accepting this.

They say that the point is covered by suitability, but suitability is a different point. Suitability means looking at the terms of the trust deed or the circumstances of the trust and then considering what type of security one wants. It is not in relation to a particular set of risks. For that reason I should have liked to see this subsection inserted.

On the other hand, I must recognise that we have a later Amendment which raises in a much more acute and controversial form a similar question. In those circumstances, while I should not feel justified in withdrawing the Amendment, I should not regard it as of sufficient importance to justify a Division at this stage.

I beg to move, in page 5, line 3 after "Act" to insert

"or before investing in any such manner in the exercise of a power falling within subsection (2) of section three of this Act".

I think that it would be convenient to discuss with that Amendment, the Amendment in page 5, line 8.

Yes, Sir Gordon.

These are drafting Amendments. Subsection (2) lays down that a special power to invest property in any investment for the time being authorised by law for the investment of trust property shall have effect

"as a power to invest property in like manner and subject to the like provisions as under the foregoing provisions of this Act."

When we discussed this Clause in the Committee upstairs, the hon. and learned Member for Kettering (Mr. Mitchison) asked me to confirm that this special power would be exercisable subject to the provisions of Clauses 1 and 2, but not subject to Clause 5. In reply, I explained that my initial view was that Clause 5 as drafted would apply to the use of these powers, but, because of the doubt expressed on the point, I agreed to look at it further and give a considered opinion.

It is the intention that Clause 5 should apply—as I said I thought it did—in future when a trustee exercises an express power which is given him to invest as authorised by the general law, and these Amendments are proposed so that the matter may be freed from any doubt.

I beg to move, in page 6, line 6, at the end to insert:

(2) Where, in the exercise of powers conferred by any enactment, an authority to which paragraph 9 of Part II of the First Schedule to this Act applies uses money belonging to any fund for a purpose for which the authority has power to borrow, the foregoing provisions of this Act, as applied by the foregoing subsection, shall apply as if there were comprised in the fund (in addition to the actual content thereof) property, being narrower-range investments, having a value equal to so much of the said money as for the time being has not been repaid to the fund, and accordingly any repayment of such money to the fund shall not be treated for the said purposes as the accrual of property to the fund:

Provided that nothing in this subsection shall he taken to require compliance with any of the provisions of section five of this Act in relation to the exercise of such powers as aforesaid.

This Amendment has been tabled in fulfilment of an undertaking I gave to the hon. Member for Shoreditch and Finsbury (Mr. Cliffe) during the Committee stage of the Bill. We gave further thought to the Amendment he then proposed, and which he withdrew on my giving that undertaking. The Amendment meets the needs of the local authority on whose behalf the hon. Gentleman was speaking, and also the needs of other local authorities which have approached us.

The purpose of the hon. Gentleman's Amendment was to ensure that moneys from the fund of a local authority, used by the authority for internal purposes, should be treated as narrower-range investments. When we discussed this question in Committee upstairs I gave in some detail the reason why I thought that the hon. Gentleman was right in principle in his proposal. I also gave an example to show why I thought that that was the case. I hope, therefore, that the House will acquit me of any discourtesy if I do not go into it in detail on this occasion.

The provision I propose now is made in the form of a new subsection (2). Clause 6 relates to the statutory powers of investment of funds other than trust funds. The new subsection provides that the internal use by a local authority or similar authority of money in those funds for purposes for which it may borrow shall be treated as if a narrower-range investment had been made with the money; and accordingly any repayment shall not be treated as an accrual to the fund, but as a realisation of an existing investment.

I know that this Amendment will be welcomed by local authorities, and I hope that the House will agree that the use of the local authority's own fund for internal purposes should be treated in the way proposed.

I recollect the discussion on this matter in Committee upstairs, and I am glad that the hon. Gentleman has been able to meet the views of the local authorities, including the London County Council, which I think was the authority at whose request my hon. Friend raised the matter.

On behalf of my hon. Friend and others on this side of the House, I thank the hon. Gentleman for this Amendment.

I beg to move, in page 6, line 27, at the end to insert:

(b) any persons (whether trustees or not) whose power to make investments is conferred by or under any enactment other than an enactment contained in a local or private Act or one relating to trustees generally.

I think that it would be convenient to discuss with that Amendment, the Amendment in page 6, line 32 at end insert:

Provided that this section shall not apply to a Post Office savings bank, a trustee savings bank or a seamen's savings bank under the Merchant Shipping Act, 1894.

Perhaps I might also refer to the Government Amendment, in page 6, line 31, leave out from "enactment" to end of line 32 and insert

"contained in a local or private Act".

I had hoped that we might discuss these three Amendments together, because I think that they raise similar points.

I am sure that that will be convenient.

Behind the general language of this Amendment, as from a cloud there come the figures of the National Debt Commissioners whose activities we considered in Committee upstairs.

The intention of the Amendment is that under the Clause where there are what I might call limited powers, or perhaps savings bank powers, they can by order be extended to the powers under this Bill.

In other words, the trustee who has a limited power of making investments—perhaps he can invest only in those securities in which savings banks can invest—can, by order, be given power to make other investments, under Clause 7 (2, b). Originally, that provision—as the Economic Secretary perceived in Committee, perhaps for the first time—would have enabled the Treasury to authorise such public bodies as the National Debt Commissioners, who at present have only savings bank powers, to make other investments provided for in the Bill. The Government Amendment would confine extensions of that character to persons whose powers are conferred by a local or private Act. They are a much more limited class of people. They would include cases where a local authority or some other public body had powers under an Act to make savings bank investments. Those powers could be extended under the Order.

The Order deals with another and very limited class of person—the person for the time being authorised to invest funds in the Duchy of Lancaster. These people require no Order from the Treasury. By virtue of this Clause they are to have their powers extended, so having the powers of investment conferred upon private trustees.

The first of my Amendments adds to that very limited category of persons,

"any persons (whether trustees or not) whose power to make investments is conferred by or under any enactment other than an enactment contained in a local or private Act or one relating to trustees generally,"

that is to say, it brings back the people who would be excluded by the Government Amendment, and it brings them back in the form that they no longer require a Treasury Order. They would obtain, by the Clause itself, power to make trustee investments.

The second of my Amendments excludes savings banks. It is put forward for the reason that we regard savings banks as being in a very peculiar position. They are quite unlike ordinary banks. They receive money from the public and it goes straight through to the Government in some form or another. On that account they have received special treatment for tax purposes. They are the safest of all investments; at any rate, they are as safe as any Government stock. But I do not think it is right that, given their peculiar position, they should be given powers of investment on the footing of ordinary trustees. On the other hand, when we consider other classes of people—by far the most obvious instance is the National Debt Commissioners—the boot is on the other leg. It is up to the Government to show why these trustees for the public should not have as powerful powers of investment as we are giving to trustees for private persons. Surely they need them.

On 3rd May I inquired from the Treasury what had happened to certain funds held and invested by the National Debt Commissioners, and I was answered by the Financial Secretary. The funds in question are two relating to National Insurance—first, the National Insurance Fund, and, secondly, the National Insurance (Reserve) Fund. The latter is much the larger of the two. On 31st March, 1961, it contained a total amount of stock of £1,257 million. That was its nominal amount. The cost price of this stock was £1,168 million. That is a very large sum, and it represents the reserve of the National Insurance Fund and the moneys provided out of contributions from somebody or other—mainly from employers and employees—to the National Insurance Fund itself. It consists literally of the pounds of the employers and the pennies of the workers.

The appalling fact is that the market value of those investments at the end of March, 1961, was only £845 million. That means that the £1,168 million had shed over £300 million of its value, and had become £845 million.

2.15 p.m.

I had the curiosity to inquire what had happened in the case of the part of that fund which had been bought on or before 31st March, 1952—that is, the end of the financial year when the Tories came into power—and the part that had been bought after the end of that year. They both suffered very considerable falls, making together the fall that I have already mentioned. The stock bought on or before 31st March, 1952, had originally cost £742 million and had apparently fallen to £480 million. It is a little difficult to follow the figures, but I think it is sufficient to say that as regards the stock bought both before and after that date there had been a very heavy fall, and a roughly proportionate contribution to the total very large amount.

When the Tory Government came into power they started the policy to which I have already referred, and in regard to which I now make no comment other than that it involved a considerable fall in long-dated or irredeemable securities. Sure enough, when we look at the National Insurance (Reserve) Fund we find that it is largely invested in just those long-dated or irredeemable Government securities. Its fellow, the National Insurance Fund, is a much smaller one. The cost of its stock was £257 million when bought, and its value in March, 1961, was almost the same, being £250 million. The explanation is simple. Short-dated securities are in the National Insurance Fund and long-dated or irredeemable ones are in the much larger Reserve Fund.

When life insurance societies, pensions funds and similar bodies whose financial requirements broadly correspond with those of the National Insurance Fund have to put their money away for a long or short time they put a growing proportion of it into forms of investment other than Government securities. I am sure that the Government themselves would be the first to acknowledge that bodies of that character—life insurance societies, pensions funds and so on—have a great deal of experience and a great deal of what is commonly called "know-how" in matters of this kind.

They do it; they find good reason for doing it, and are doing it to an increasing extent. They are, of course, broadly, rather in the position of private trustees, the type of people we are considering in this Bill, but the trustees for the public— I do not refer specifically to the Public Trustee but to the people who are the trustees for the public—are unable to follow that practice. The practice which they have followed has resulted in the somewhat disastrous consequence which I have just been indicating.

One says to oneself, "The National Debt Commissioners—who are they"? I said this in Committee, but I repeat it in the House because there are some hon. Members present who were not in the Committee. Mr. Speaker is one, the Chancellor of the Exchequer is another, the Master of the Rolls is another, the Lord Chief Justice is another, the Accountant-General of the Supreme Court is another and the Governor and the Deputy-Governor of the Bank of England are others, who all make up the whole of them.

There is this consolation about it. They have never met I believe, during this century, and they are one of those bodies in the British constitution which we seek to preserve, as it were, as somewhat picturesque anachronisms.

The Trustees of the British Museum.

The Trustees of the British Museum are not by any means anachronisms. The right hon. and learned Gentleman must take care not to say that to my right hon. Friend the Member for South Shields (Mr. Ede), who is one of them. I should not for a moment describe the right hon. and learned Gentleman as an anachronism. He is much too accurate.

One of my hon. Friends who was a Lord Commissioner of the Treasury is looking rather pale at what the bon. and learned Gentleman is say- ing concerning the meeting of these members. I hope that the hon. and learned Gentleman will bear that in mind.

I once had a Lord Commissioner staying with me. He was followed by quantities of boxes containing documents which he was to sign. The Treasury took steps to see that he was aware of what he was signing. Therefore, I should not for a moment describe the Commissioners of the Treasury as anachronisms. They are certainly alive to other things outside their functions, but the National Debt Commissioners are rather a different story. They have not met during this century, and, in fact, all their functions appear to be carried out by—I forget the gentleman's official description but he is a distinguished civil servant—a Treasury official. In fact, of course, these are Treasury investments.

I am bound to say that the state of affairs of the National Insurance Reserve Fund led me in Committee to say—may I be allowed to repeat it now?—that the Treasury, as a thundering big investor of money, would do much better to consult the Church Commissioners who are very good indeed and make a lot of money out of investments every year. Of course, they cannot at present. They are only allowed to invest in Government securities and the division of the funds, if carried on under the present practice, is going to ensure under existing circumstances losses of the order which I have already indicated.

Surely, if we are to give these powers to private trustees, there is no reason, no sensible reason, whatsoever why we should deny them to people who are trustees, I repeat, of the pounds of the employers and the pennies of the workers in connection with National Insurance. I am afraid that the Government's reason for refusing to deal with the matter here is sheer political prejudice.

We suggested at the last election that it might be a good plan if funds of this kind were invested to some extent in ordinary shares, whereupon the Tory Party said that we were socialising by the back door, that we were really as wicked as the Church Commissioners and that something or other very drastic ought to be done about us. The Tories won the election on that sort of cry. But, now that we are in the calmer atmosphere between elections, perhaps they would recognise that in common justice and fairness to the people who pay contributions to National Insurance their reserve funds ought not to continue to be invested in such a way that they succeed in dropping nearly one-third of the total value of the Reserve Fund.

This is the object of the Amendment, though I do not suppose for one moment that the Government will accept it. It is much too sensible and much too obviously right for them to do anything of the sort. All that interests me for the moment is what they are going to say. Are they going to put forward the real reason, that they have found a Socialist under the bed or under the bench, or somewhere, and that it would be bad politics for the Conservative Party to accept the Amendment? Are they going to defend it on the grounds that it is all very well to give powers to private trustees, because they can be regarded as comparatively sensible, but that the National Debt Commissioners and the Treasury, in particular, are so hopelessly idiotic that one cannot trust them with the powers, or, again, are they going to say that it is just morally wrong that the National Debt Commissioners should hold anything but Government stock? I wonder what the answer will be. Let us see.

Subsection (1) of Clause 7 gives the benefit of the wider powers granted by Clause 1 of the Bill to the person specified in subsection (2) of Clause 7. Subsection (2) as it now stands, specifies directly only the Duchy of Lancaster, and, in addition, the Treasury may make an Order specifying any person whose powers of investment are conferred by or under a public and general Act or a local or private Act.

The two Amendments in the name of the hon. and learned Member for Kettering (Mr. Mitchison) would widen the effect of subsection (2) of the Clause to refer directly to any persons—other than a Post Office Savings Bank, a Trustee Savings bank or a seamen's savings bank—whose powers are conferred by or under a public and general Act other than this Bill. In other words, if, by a general Act, Parliament has previously decided to restrict a person's power to a range of investments narrower than those conferred on trustees generally, subsection (1) of Clause 7 would automatically nullify that decision and confer on the persons powers of investment granted by Clause 1 of the Bill, which includes the power to invest in equities.

The intention of the Amendments in the name of the hon. and learned Gentleman is, of course, the opposite of the Government's Amendment to page 6, line 31. The Amendment which stands in my name is intended to narrow Clause 7 even further so as to limit the powers of the Treasury to make an Order under subsection (2) to those persons whose powers are conferred only by a local or private Act. The Clause will then not apply to any persons whose powers are conferred by a public and general Act.

We spent some time on this Clause in Committee, and, of course, its purpose is quite simple. The investment powers of the Duchy of Lancaster are restricted by a public and general Act to a range of investments somewhat, but not greatly, narrower than those authorised by Section 1 of the Trustees Act, 1925. I do not think that I need, once again, explain why it was that we thought it reasonable to give these additional powers to the administrators of the Duchy. But, having done that, we thought it was possible that there might be other persons whose powers of investment were granted by specific enactment and were restricted in a manner similar to the restrictions imposed in respect of the Duchy of Lancaster.

2.30 p.m.

At the time when we discussed this in Committee we had heard of no such person, and we have since heard of no such person. Nevertheless, it was thought, and we still think, that the facility would be useful for such persons if at any time they should come forward. If the Treasury was satisfied that a widening of the powers was unobjectionable, it would then make an Order applying the provisions of the Bill. The expense to the person of promoting amending legislation would be avoided, and this would be particularly apt in the case of private legislation.

It was not the intention, however, that the Bill should automatically and indiscriminately over-ride powers of investment where Parliament had consciously conferred powers narrower than had hitherto been authorised for trustees generally. Perhaps I might give an example of where Parliament has decided in a public and general Act that the investment powers of persons should be narrower than at present authorised for trustees generally.

The example is the Building Societies Act, 1960—with which the hon. and learned Gentleman and I were concerned for many hours last year—in respect of both incorporated and unincorporated building societies. The House decided last year to grant only restricted powers of investment. Other examples, as the hon. and learned Gentleman has pointed out, are the National Debt Commissioners in the exercise of their functions under the National Insurance Act, 1946, in respect of the investment of the National Insurance Fund and of the National Insurance (Reserve) Fund—

Before the hon. Gentle-many leaves the example of the building societies, I wonder whether he would help me. My impression was that their powers of investment were to be limited by a Treasury Order—I think it was a Treasury Order—just as, in this case, it is proposed that the powers of investment of the bodies indicated here should be granted by Treasury Orders.

This is, of course, a matter of drafting and construction, but I must say that I have the impression, though I may be wrong, that if we were to accept the hon. and learned Gentleman's Amendment it would automatically increase the powers of investment of the building societies. I think that he will find that this is so, but, even if I am wrong, it is still true, as he fairly pointed out, that to accept these two Amendments would grant additional power of investments to the National Debt Commissioners in the exercise of their functions concerning the National Insurance Funds.

The two Amendments in the hon. and learned Gentleman's name really raise the same issue that was debated in Committee on an Amendment to apply Clause 7 of the Bill specifically to the National Debt Commissioners. That matter was then fully thrashed out, as my hon. Friends will remember, and the Amendment was defeated.

The issue on these two present Amendments, Mr. Speaker, is really a very simple one. It is whether Parliament ought to make direct and general provision in the Bill to over-ride its own intentions as respects powers of investments which it has deliberately restricted in specific Acts. The Government contend that if Parliament is to be asked to revise the investment powers of a major body to which it has given a very narrow range of investments, fresh legislation should be introduced for that purpose so that Parliament may again consider the individual merits of the case or, at least, that the individual case should be specified in the Bill, as reference is made specifically to the Duchy of Lancaster.

The issue on the Amendment standing in my name is also quite simple. It is whether there should be left in Clause 7 a power that would enable any Government to make an Order permitting say, the National Insurance Funds to be used to acquire the ownership or control of industry and commerce. It was agreed on both sides in the Committee on the Bill that this could be done as the Clause is now drafted. Here, again, the Government take the view that a major change of this kind should be the subject of a separate Bill.

What is in the mind of the Opposition is, I think, crystal clear. They want the whole of the National Insurance Funds—valued at over £1,000 million—to be available for investment in accordance with the extended powers of investment provided in this Bill; that is to say, more than £500 million could be invested in equities. The Opposition Amendments would, of course, give a Labour Government dedicated to the principles of nationalisation immense powers of State control over industry without having to obtain the slightest semblance of parliamentary approval, or having to incur a single moment of parliamentary displeasure.

The hon. and learned Gentleman will not be surprised to learn that this is a facility which the present Government are not minded to give the Labour Party, and I therefore ask the House to reject the two Amendments standing in his name, and to accept the Government Amendment.

I just want to say once more that we are regrettably bound to reach the conclusion that the Government are so frightened of their own shadow, and hon. Members opposite are so terrified of their own shadows—or, as my hon. and learned Friend said, of seeing Socialists "under the bed"—what worse nightmare could any man have than about a Socialist?—that they are unwilling to do the one thing they are sent here to do by their constituents, which is to protect the taxpayers' money and to see that it is wisely invested.

The matter we are debating is why the National Insurance Funds should be under a disadvantage as compared with the funds of private insurance companies. In many ways there are many arguments that attract me to this point of view, and probably the strongest is that it would provide a very great opportunity for, perhaps, mellowing the wilder men of the Socialist Left, who would have an interest in the affairs of many companies.

There are, however, many disadvantages, and the main one, as my hon. Friend has said, is the question of control. Let us make no mistake about it; the National Insurance Funds could easily acquire in the market a 51 per cent. holding of, mainly, medium-sized companies and, perhaps with more difficulty, of the larger companies. With a Tory Government that would not necessarily be a very serious matter, but a 51 per cent. holding in I.C.I. would obviously give a Socialist Government very great control over the whole of the great chemical industry. This is backdoor nationalisation, so I oppose the Opposition Amendments.

I must protest at the Economic Secretary's last remark. He said that to invest £500 million of public money in private industry was more dangerous, and worse for the country, than a depreciation of £300 million or £400 million in the National Insurance Funds, largely the proceeds of the workers' contributions. What is £500 million invested in private industry today? We have heard talk of a 51 per cent. interest in I.C.I. Though I have not the figures before me, I rather suspect that to acquire such an interest would cost about one-fifth of that £500 million. Further, what is £500 million compared with the total value of private industry shares today? I should say that it represents about 2 per cent. or 2½ per cent. Yet that produces a feeling of horror on the Government benches.

What utter, complete, absurd rot—just because of the prejudice of the Tory Party against giving wider power of investment to State authorities in dealing with public money, which should be invested in a reasonable way, and not in such a way as to destroy one-third of the value of the National Insurance Funds since they were contributed.

I got the answer I expected—sheer prejudice and nothing else whatever. The first point was that is was not in the Bill and a new Bill would be required. At the same time the hon. Gentleman admitted that in the Bill as originally put forward it would have been possible to do what we are asking should be done now, or at any rate half of it, by Treasury Order instead of by Statute.

Next, we were told it is impossible to do this with public bodies, but the hon. Gentleman conveniently forgot the Duchy of Lancaster, which is provided with statutory powers already and whose statutory powers are being altered by this very Bill. He also forgot, although he had not been able to find an instance, that he put in a paragraph to insert another category of people exactly corresponding to those he said ought not to be in the Bill. Then we came to the real meat of the matter. This would mean Government control. Dreadful Socialists might do something as bad as could be done with the Anglo-Iranian Oil Company, in which the Government hold more than 50 per cent. of the shares and appoint directors.

I was glad to have the support of the hon. Member for Belfast, North (Mr. Stratton Mills) in saying that we should not deny to people in the position of public trustees what was given for a very similar purpose to pensions funds and the investing of money for a very similar purpose. That is all we are asking for. Of course, in the eyes of hon. Members opposite it is perfectly all right for life insurance companies to get 51 per cent. of the shareholding of some company or another. They are responsible to no one, but what is dead wrong is that people answerable to Parliament and the voters—in short all the community—should have these same powers.

It is apparently right for those responsible to no one, the life insurance company or directors of a private pension fund, to have these powers, but what is reprehensible and too wicked to imagine is that the representatives of the public should have any power to do anything of this sort. If we want to look for ideological prejudice, in this very short debate today we have it stark and so clear.

Hon. and right hon. Members opposite, as my hon. Friend the Member for Bethnal Green (Mr. Holman) pointed out, prefer that more than £300 million of the pounds of the employers and the pennies of the workers should be

I shall reply very briefly to the hon. and learned Member. The sole question is whether a major body such as the National Debt Commissioners should be dealt with, as it were, in passing in a Bill of this kind, or dealt with specifically. I can sum up our approach by saying that it is not one of prejudice, but one of constitutional propriety.

I beg to move, in page 8, line 14, at the end to insert:

(3) In approving a scheme under this section, the Treasury may direct that the Prevention of Fraud (Investments) Act, 1958. or the Pre- vention of Fraud (Investments) Act (Northern Ireland), 1940, shall not apply to dealings undertaken or documents issued for the purposes of the scheme, or to such dealings or documents of such descriptions as may be specified in the direction.

The effect of this provision is to empower the Treasury to direct that the Prevention of Fraud (Investments) Act, 1958, shall not apply for the purpose of local authority schemes which are dealt with in this Clause. Under the 1958 Act, the managers of schemes for the mutual investment of local authority funds have to conform to the requirements of that Act. In particular, they have to obtain either specific or general permission for the issue of circulars and a licence and exemption for dealings.

When one considers the standing of the managers of local authority schemes, there can be no doubt that a general permission would be given. The simplest way to do that is to give the Treasury power to direct that the Act shall not apply to transactions under the schemes. There are respectable precedents for this under the Church Funds Investment Measure, 1958, and the Charities Act, 1960.

I do not wish to hold up the Bill, although I cannot think that any useful purpose will be served by passing it, but does it not ever occur to anyone that this constant playing of musical chairs with Statutes is an infernal nuisance to everyone connected with the law? When a fairly unecessary Measure is introduced in 1958, is it not making life additionally intolerable to lay down a whole series of regulations for the prevention of fraud, then introduce a new Measure in 1960 to make special provisions to protect people from their own folly in not employing a solicitor to draft their will, and then to amend the Prevention of Fraud (Investments) Act by exempting certain authorities from being brought in unnecessarily, from having unnecessary provisions applied to them, and so on?

It is bad enough these days for solicitors to look at the financial columns of The Times to see what has happened to trustee investments without their having to look up a whole series of interrelated Statutes, to supply a card index of inter-related indices, and to have a managing clerk on the trust side or the Chancery side with some bibliographical experience in order to check on the Acts passed by the Government to amend the Acts passed by their predecessors of a year or two ago. This is going on all the time.

If the Government wish to say in a Clause like this, "We do not think it necessary for the general measures to apply", why do not they say so in simple language and be done with it, instead of always referring back to a reference back which amended a previous reference back? There must be a limit to the amount of complexity that it is necessary to introduce into the law to keep the musical chairs system going.

Before an answer is given to the observations of my hon. Friend the Member for Oldham, West (Mr. Hale)—and I hope that an answer will be given—may I put this to the Government? If my recollection is right, the 1958 Act not only dealt with the matter of licensing dealers in stocks in certain respects, but contained other provisions covering in more general terms fraudulent inducements to invest. I can understand why it should be regarded as undesirable that the licensing provisions affecting dealers in stocks should not apply in this instance to local authorities. But is it not a little odd that the more general provisions of the 1958 Act dealing with fraudulent inducements to invest should be, so to speak, positively and overtly declared not to apply to local authorities?

The Clause is of narrower scope than either the hon. Member for Oldham, West (Mr. Hale) or the hon. and learned Member for Liverpool, Edge Hill (Mr. A. J. Irvine) seemed to suggest. It allows local authorities to invest in, so to speak, common good schemes. Therefore, all that we are concerned with is the organisation of those schemes by local authorities and the various documents put out by the managers of those schemes. What the Amendment says is that, in view of the high standing that one inevitably gets in the manager of a common fund in which local authorities can invest, it may be unnecessary that there should be compliance with the requirements of the 1958 Act. This merely gives power to the Treasury to exempt them from going through the requirements of that Act and, in particular, from having to seek permission for the issue of circulars and a licence and exemption for dealings, and so on.

I beg to move, in page 8, line 30, at the end to insert:

(d) in Northern Ireland, the council of a county, a county or other borough, or an urban or rural district, and the Northern Ireland Local Government Officers' Superannuation Committee established under the Local Government (Superannuation) Act (Northern Ireland), 1950.

It would be convenient to discuss, at the same time, the Amendment in page 9, line 10, to leave out "Section" and to insert "Sections ten and".

This and the next Amendment, which is consequential, will enable certain authorities in Northern Ireland to participate in the local authorities' mutual investment trust which is to be set up under the Clause. This is the result of an approach made to us by local authorities in Northern Ireland. The local authority associations of England and Wales and Scotland, which are sponsoring the scheme, have been consulted and have no objections to what is proposed.

The proposal should, therefore, commend itself to everybody, and I commend it to the House.

I beg to move, in page 10, line 27, after "territory" to insert:

"which at the time of investment is".

This is a short point, but not without importance. The First Schedule consists of three Parts giving lists of investments. We are concerned here with the narrower-range investments requiring advice, which comprise Part II. Line 27 is part of paragraph 4, which runs as follows:

"In fixed-interest securities issued in the United Kingdom by the government of any overseas territory within the Commonwealth or by any public or local authority within such a territory, being securities registered in the United Kingdom."

There follow references to the Overseas Service Act, 1958. I have looked up that Act and I do not think that it is material to the point which I am raising. It includes, among other things, bodies which have a quasi-sovereign character in that they operate independently in a number of countries, and cases of that sort.

Let us suppose that an overseas territory leaves the Commonwealth. Is a trustee entitled under this paragraph to invest in the securites because they were issued in the United Kingdom by the Government of that overseas territory when it was within the Commonwealth, or is the test that it should be issued by the Government of the overseas territory which, at the time of investment, is within the Commonwealth? That is the short point. The principal case which one has in mind is obviously that of South Africa, but it is a general point and I put is accordingly.

To obviate any criticism, I would say that as far as I can judge—and the Government will correct me if I am wrong nothing would prevent a trustee, to take that as an instance, who has South African stock in his hands from retaining it. This is a question of further investment. The question is whether further investment could be made on the strength of South Africa having formerly belonged to the Commonwealth and securities having been issued when she belonged to the Commonwealth. I imagine that there can be no question of any securities now issued by South Africa being within the Schedule.

I support the Amendment moved by my hon. and learned Friend the Member for Kettering (Mr. Mitchison), partly because of a discussion in Committee on the Republic of South Africa (Temporary Provisions) Bill. During that Committee stage, my right hon. Friend the Member for West Bromwich (Mr. Dugdale) moved an Amendment to ensure that after South Africa had left the Commonwealth it would no longer be possible for her to issue on the British market stocks which would enjoy trustee status.

In putting forward that Amendment, we had in mind two considerations, the first being our duty to protect the beneficiaries of trusts in this country from any imprudent investment which their trustees might make. We certainly think that in the present state of things in South Africa investment in new stocks issued by the Government of that country would be a very doubtful and, certainly, an improvident investment for trustees to undertake, not to speak of any other person.

It is well known that in South Africa a small minority is ruling a vast majority which is bitterly opposed to it. It is well known that the Minister of Defence there has told the public that the armed forces of that country are to be used in future mainly for internal purposes. The South African Government have called up large numbers of troops in the expectation of the possibility of serious civil disturbance. I do not want now to attempt to make a speech about South Africa, but in view of that well-known dangerous situation in South Africa we wanted to leave beyond peradventure the possibility of trustee status being accorded to stocks issued in future by the Government of South Africa.

The second consideration was that the Secretary of State for Commonwealth Relations had himself said, in opening the debate on the Republic of South Africa (Temporary Provisions) Bill, that it was most undesirable that countries which left the Commonwealth should continue to enjoy advantages which they obtained only by membership of the Commonwealth.

In so far as it might be an advantage to the Government of South Africa to float in this country a loan whose stocks would have trustee status, it would be an advantage enjoyed only by Commonwealth Governments. Therefore it would be wrong, in the words of the Secretary of State himself, if South Africa were to gain any such advantage.

During our discussion, we were led to understand by the Joint Under-Secretary of State for Commonwealth Relations that the Government themselves might put down an Amendment to the Bill. The hon. Gentleman said that if the Bill which we are considering today was not passed before 31st May:

"… the Government will consider introducing an Amendment which will bring the Trustee Investments Bill under the umbrella of this Bill."—[OFFICIAL REPORT, 3rd May, 1961; Vol. 639, c. 1432.]

We took that to mean that the Government might be introducing an Amendment to this Bill. When we found that they were not doing so, we put down our Amendment.

It may be—we hope so—that the Government have not put down an Amendment to the Bill because they are quite satisfied that its provisions are already such that there is no danger of any new issue of South African stock getting trustee status. If we get an assurance of that kind, naturally we will be only too ready to withdraw the Amendment.

It will be within the recollection of many hon. Members that when the debate took place in Committee on the Amendment moved by my right hon. Friend the Member for West Bromwich (Mr. Dugdale), it was urged from both sides that that Amendment was untimely on the Republic of South Africa (Temporary Provisions) Bill. It was urged from the back benches on both sides and by the Minister in replying that the subject could be better dealt with under the Bill which is now before us.

As my right hon. Friend the Member for Middlesbrough, East (Mr. Marquand) has said, on two occasions the Secretary of State for Commonwealth Relations indicated that the Government would consider introducing an Amendment to the Bill to deal with the point which is now under discussion.

The Government have not done that, and I think we are, therefore, entitled to ask for art explanation from the Government and to ask whether the trusteeship investments in the Union of South Africa will not be permitted in future.

I would emphasise the two points which have been made by the right hon. Member for Middlesbrough, East. Anyone who is aware of the conditions in the Union of South Africa today knows that investments there are in a very uncertain position, and that, although the Republic has been established, although the Union of South Africa has withdrawn from the Commonwealth, the Government are there by a minority, against the will of the great majority of the people, and that inevitably, in the course of history, the time will come when the majority of the people will seek redress of that situation. In conditions like those in the Union of South Africa it seems to me very wrong indeed that we should be giving these facilities for investments and giving the Government the authority for them which is in the Bill.

The second reason why one feels that one should speak in favour of this Amendment and ask for some clarification by the Government of the position is this. The Union of South Africa has withdrawn from the Commonwealth. I shall use only a sentence in case I may be out of order, but I hope the day will come when the majority of the people in the Union of South Africa will be so enfranchised that they will return to the Commonwealth. In the meanwhile, I suggest, it would be wrong, not only from the point of view of our own Government but from the point of view of our bona fides with the Governments of the other members of the Commonwealth, if we were now to say that the withdrawal of the Union of South Africa from the Commonwealth means that facilities allowed to the members of the Commonwealth shall also be permitted to the Union of South Africa.

The Secretary of State for Commonwealth Relations said in very clear terms that in this new situation, the Union Government having withdrawn, it should be made clear that they did not continue to enjoy the facilities and privileges of membership of the Commonwealth. If they do continue to enjoy those facilities, why then, withdrawal from the Commonwealth is formal and farcical.

We are urging the consideration of this Amendment because we take the view that, the Union Government having withdrawn from the Commonwealth, they should not continue to enjoy the advantages of Commonwealth membership.

This Amendment is in general terms and I want to ask a general question about it. I take it that if any security falling within any part of this Schedule for any reason is dis- qualified from being included within that part the trustees will be able to continue to hold it, there will be no obligation on them to treat it as if it had changed, but in the particular case with which we are now dealing the possibility would arise that the security ceased to be such as could be regarded as narrower-range investment. I would ask my hon. Friend whether, in the event of any security ceasing to be narrower-range investment, it could continue to be held by the trustees as narrower-range investment—till such time as they sold it, of course, when they would have to reinvest in the narrower-range.

I also should like to ask the Government why they have not carried out the undertaking which they gave in Committee on the South Africa (Temporary Provisions) Bill. It is true that the Government did not finally commit themselves to introducing an Amendment, but the Minister who then spoke for the Government did so in sufficiently definite terms to reassure us that it was the Government's intention to do this if it were found necessary. But even if the Government were to accept this Amendment, would that by itself cover the position? I understood from the Minister's statement on the South Africa Bill that unless an Amendment were moved to this Bill in terms rather different from those of the Amendment on the Order Paper this would not cover the situation.

The South Africa Act, as it now is, freezes the legal relationships between this country and the Republic of South Africa for a period of up to twelve months. We understood that this would mean, in terms of trusteeship investment arrangements, that the conditions applying to trusteeship investments between South Africa and this country as they existed on 31st May would continue to exist for twelve months. It is precisely this point that my hon. and right hon. Friends felt to be exceedingly unsatisfactory.

My hon. Friend the Member for Eton and Slough (Mr. Brockway) has put in clear terms why we thought this was so from the political point of view of developments in South Africa, but in this Bill we are concerned particularly to safeguard the rights of beneficiaries of trusteeship arrangements in this country. I cannot see how the Government can seriously argue that it is desirable during the months ahead, whatever future arrangements are made with South Africa, that trustees should be in a position to invest in South African stock and that that stock should be allowed to enjoy trusteeship privileges.

Clearly, the political situation in South Africa is so unsettled that new South African issues cannot have the security which one is entitled to expect in stocks on this list. The position of present investors in South African stock is particularly difficult. I would not wish anything done to harm the rights of beneficiaries from those stocks at present, but if the South African Government were to make new issues in the months that lie ahead there should be no question of their being regarded here as trustee stocks.

I think that it would be convenient to the House if I intervened in the debate now. I believe that the hon. Member for Dundee, East (Mr. G. M. Thomson) has misunderstood the present position. It would be convenient, first, to make some general observations on the questions put to me by the hon. and learned Member for Kettering (Mr. Mitchison) and then deal with the special position of South Africa, though I think that when I have answered the general questions the position of South Africa will be probably be clear.

One can best consider the general position by asking and answering three questions. First, what is the position in the case of a territory in the Commonwealth at the time of the issue of the security and also at the time of the making of the investment by the trustee? In that case, obviously, the security is an authorised investment under the First Schedule to the Bill. Secondly, let us consider the question of a territory in the Commonwealth at the time of issue of the security, but not at the time of the making of the investment. In that case, the investment would not be an authorised investment as a new investment.

Thirdly, if one considers the case of a territory outside the Commonwealth at the time of the issue and at the time of the investment, then, obviously, the security would not be authorised. It has been rightly said in the debate that despite the fact that an investment may become unauthorised because of a territory leaving the Commonwealth it can, nevertheless, be retained by the trustees under Section 4 of the Trustee Act, 1925.

I was also asked whether an investment under Schedule 1, Part II, would be a narrower-range investment on its ceasing to be an authorised investment because the Government or territory concerned had left the Commonwealth, and whether, in that eventuality, the security could still continue to be held in the narrower range as a narrower-range investment. The answer is that it could not so be held. It would either have to be included in the wider range of investment, because although unauthorised it would still be retained under Section 4 of the 1925 Act, or there would have to be reinvestment.

Would it be correct to say that it could even be acquired under the wider range, also, at any later date?

That depends entirely upon whether it comes within the terms of the Schedule.

Whether it comes within the range?

It depends on whether it comes within the provisions of the Schedule which set out the wider range of investments that could be made.

Would the Economic Secretary indicate any provision in the wider-range list—I do not think that there is one—which could possibly include these investments?

I think that the hon. and learned Gentleman is quite right. I ought to make clear that I was talking about securities which had ceased to be authorised investments but which could, nevertheless, be retained and I was saying that on their retention as unauthorised investments they could no longer be retained as narrower-range investments, but could still be retained by virtue of Section 4 of the 1925 Act because there is there special provision made for the retention of unauthorised investments.

I should like to say a brief word about South African stocks, because several hon. Members have asked about them. When the Bill becomes law, South African Government stock will cease to be eligible for investment by trustees whose powers are governed by United Kingdom legislation. This is so because paragraph (4) of Part II of the First Schedule confines investment in overseas stocks to certain stocks of those territories which are within the Commonwealth and, therefore, it would have been necessary to make special provision for South African stocks if trustees were to be continued to be allowed to make new investments in them. Although we have always felt that it would be extremely difficult to continue trustee status indefinitely, nevertheless we considered whether it would be appropriate to apply to these stocks the standstill arrangements which apply to legislation passed before 31st May last, and that is why hon. Members have suggested that we should give consideration to a possibility of amendment of this Bill.

We recognised from the outset that as the Bill would be making an important change in English law, there was a distinction between this and other legislation which is merely being, as it were, preserved during the standstill period. After giving the matter very careful consideration, we came to the conclusion that we should now remove the doubts which have arisen about the position of South African stocks under trustee legislation. We did not feel that we would be justified in continuing to ignore the fact that those stocks were no longer Commonwealth stocks. I emphasise once again, because it is very important that it should be known, that although South African stocks will cease to be eligible for investment by trustees, those trustees who already hold stocks may retain them by virtue of Section 4 of the Trustee Act, 1925.

To deal not with the South African aspect, but with the general question, this is a matter which we have to clear up. It now emerges that, on ceasing to be a trustee investment under the new definition, that is to say, on ceasing to belong to the narrower range and not fitting into the wider range, and, in the case of a trust, where the division has been made under the provisions of the Bill, an investment, which was a perfectly proper trustee in- vestment, has no place allocated to it, notwithstanding that the trustees are not required to dispose of it, because it was a trustee investment at the time it was acquired. I do not see that it would be a special powers investment. It is clearly asserted and accepted that it is not a narrower-range investment. I cannot see where it would fit into the wider-range investment.

That being the case, there is sufficient ground for asking what the humble accountant does about it. The law on the matter is that the trustee can keep such an investment, but where does the accountant show it? This is not a purely technical question, because the whole basis of the Bill is to divide between narrower-range, wider-range and special power investments.

Clause 2 (2) says:

"Property belonging to the narrower-range part of a trust fund shall not by virtue of the foregoing section be invested except in narrower-range investments, and any property invested in any other manner which is or becomes comprised in that part of the trust fund"—

which is the case which the hon. Member is postulating—

"shall either be transferred to the wider-range pant of the fund…or be reinvested in narrower-range investments as soon as may be."

It is covered by those two limbs. It is either transferred to the wider-range part of the fund, or it is reinvested in narrower-range investments.

Does that mean that when the transfer the right hon. and learned Gentleman has described takes place there will be a wider range of investment which does not meet the definition in Part III of the First Schedule? Is that the effect?

Yes, that is the effect. It is covered by Section 4 of the Trustee Act, 1925, which says:

"A trustee shall not be liable for breach of trust by reason only of his continuing to hold an investment which has ceased to be an investment authorised by the trust instrument or by the general law."

In effect, that is caught up in line 28, on page 2.

Is the right hon. and learned Gentleman not under an obligation to alter Part III of the First Schedule so as to introduce a new category, being property not already covered and coming out of Part II.

rose—

I think that the hon. Member for Eton and Slough (Mr. Brockway) has already spoken once.

I intended to put a question before the Economic Secretary resumed his seat. I apologise if I was a little slow. My question is whether the terms of the Bill will come into operation as soon as the Bill receives the Royal Assent, or will be held up for one year under the Republic of South Africa (Temporary Provisions) Bill.

This Bill will receive the Royal Assent after the standstill Bill, and so will come into effect, for all the purposes which we have been discussing on this Amendment, straight away.

The Government have not answered one small question. Are they accepting this Amendment? Before they come to a hasty conclusion about it, I suggest that this is a case where no harm could be done and where there is some ambiguity in the paragraph as it stands. We have not the usual recourse to another place, because this Bill has already been through there, but I hope that the Government will take it from me that I have no malevolent intentions, or intention to do anything but to clarify the position. I do not know what their answer is, but I trust that they will accept the Amendment.

I must advise the Committee not to accept the Amendment. From one point of view it might be thought not to do much harm, but it would mean, I understand, that if the words.

"which at the time of investment is"

were inserted, securities of a country which left the Commonwealth would continue to be authorised securities if they were retained, whereas at the present time the position is that if the securities cease to be authorised they may still be retained by the trustee under Section 4 of the 1925 Act.

As the position is at the moment, the trustee is in no doubt about his position. These securities are no longer authorised securities, but they may be retained, although the trustee is precluded from making new investments in those securities because they are unauthorised. The position is clear and I cannot advise the House to accept the Amendment.

I speak again by leave of the House. This is a small matter. The Government's view of this Amendment is quite wrong, and I hope that the Solicitor-General and the Economic Secretary will look at it quickly and to good purpose. These are investments, and the question is, what is the position when one makes the investments? What this Amendment would do would be to make it clear that, when one makes the investments, the overseas territory must be within the Commonwealth if it is to come under this Schedule. If we do not put in this Amendment there is ambiguity.

From the paragraph we are talking about—

"In fixed-interest securities issued in the United Kingdom by the government of any overseas territory within the Commonwealth…"—

I take it that a stock that was issued by South Africa ten years ago, on one reading of those words comes within this provision and, on another reading, does not. I said that in moving the Amendment, and I hope that the Government will clear the matter up, otherwise what they said about the construction of the Schedule will, unfortunately, carry no weight in a court of law. I suggest that it should be clarified.

I have taken advice and I think that the hon. and learned Member will see that what I have said was correct. I am satisfied that there is no ambiguity in the provisions of the Bill as they stand and, therefore, I ask him not to press the Amendment.

I beg to move, in page 11, to leave out lines 39 to 42.

I think that it would be convenient to discuss also the Amendment in the name of the hon. Member for Gloucester (Mr. Diamond) and those of his hon. Friends—page 12, line 13, at end insert:

2. The securities mentioned in paragraphs 1 to 6 and 8 to 10 of Part II and in paragraph 1 of Part III of this Schedule do not include long-dated or irredeemable securities, that is to say fixed interest securities, debentures, guaranteed or preference stock or shares, where the holder is not entitled to repayment of the principal within twenty-five years from the date of investment.

3. The loans mentioned in paragraphs 9 and 13 and the mortgages mentioned in paragraph 13 a Part II of this Schedule do not include long-dated loans or mortgages, that is to say loans or mortgages, where the holder is not entitled to repayments of the principal within ten years from the date of investment.

4. Nothing in the two foregoing paragraphs of this Schedule shall preclude the retention by a trustee of long-dated or irredeemable securities, loans or mortgages held by him at the time of the passing of this Act.

That would be convenient, Mr. Deputy-Speaker. I shall, in view of the time, deal with these matters as shortly as may be because, of course, we have done everything that we could to facilitate the quick adoption of the Bill. I only draw the attention of the House to the meaning of the Amendments and give one or two reasons which impelled us to put them down.

The Schedule enables trustees to invest in different kinds of investments—the narrower range and the wider range—and in the case of the narrower range, certain of them require advice. The first Amendment omits perpetual rent-charges charged on land in England and Wales and Northern Ireland and investments of that kind. The second Amendment deals with the problem of long-term or irredeemable securities. Paragraph (2) of the second Amendment deals with long-dated or irredeemable securities which are defined as fixed-interest securities and so on, which are not entitled to repayment within twenty-five years. The next paragraph deals with loans which are not repayable within ten years. Paragraph (4), which is very important, makes it absolutely clear that, although these Amendments are proposed, nothing is to alter the existing powers of trustees with regard to the long-dated or irredeemable securities.

There is very great dissatisfaction and a deep sense of injustice felt in the country at large about a number of irredeemable stocks, particularly gilt-edged, and more particularly 3½ per cent. War Loan. There is very considerable feeling that the Government are not facing up to their responsibilities there. Although that is an aspect of this matter, what I particularly draw attention to is the fact that so long as the Government carry on with their present attitude of refusing to face their responsibilities as an honourable borrower, trustees must be protected, and the only way of protecting trustees, therefore, is to exclude from these permitted investments that kind of investment.

After all, these investments are the new look or the modern look on safe investments. The equities—the "blue chips," as I prefer to call them—are included under Part III because they are safe investments as far as one can go. All investments under the earlier Part are safe investments in the Government's view. But what we are saying is that it is right to have a full look at it, not only to add things which are safe investments, such as "blue chips," but to take away things which are no longer safe investments and have shown themselves not to be safe.

The hon. Member for Walsall (Sir H. d'Avigdor-Goldsmid) drew attention at an earlier stage in our discussions to the interesting position of War Loan, which is stated to be repayable in 1952 or after. Everybody who holds it hopes, of course, that the "after" will be very soon after. But, as the hon. Gentleman quite rightly says, when the stock was issued the attraction of it was that it was certainly not repayable before 1952. It was deliberately bought on the basis that it was a long-term investment. People then wanted to get out of short-dated gilts and into long-dated gilts, and they did as the hon. Gentleman has said. They have lost a fortune as a result of it.

This adds to the strength of our Amendment. If those people had been permitted to do so, they would have saved themselves millions of pounds, all sorts of trustees would have saved themselves enormous headaches, and all sorts of beneficiaries who find themselves in a hopeless position today would have been much better off than they are now. It is, of course, beyond reasonable human knowledge at such a point in time to take a fore-look into the future. But we now know. Indeed, we now know that it is just no longer safe to regard these long-dated securities as appropriate securities for investment by a trustee.

I bitterly regret that the Government are not facing their responsibilities in this way. It does not give any hon. Member on either side of the House any pleasure whatever to record the fact that at the moment War Loan stands at about 53, has been falling considerably and is likely to continue to fall.

It gives hon. Members no pleasure to record that yesterday sterling reached its lowest point since 1957. The Government could deal with this either by accepting the Amendment or by putting a date—certainly a date far ahead—on these securities. People would then know that, sooner or later, the money would be repayable.