asked the Chancellor of the Exchequer whether he is aware that in 1844 the Chancellor of the Exchequer reduced the rate of interest of Consols from 3½1 per cent. to 3 per cent.; that in 1888 the then Chancellor of the Exchequer, Mr. Goschen, reduced the rate of interest from 3 per cent to 2¾4 per cent., and later to 2½1 per cent.; that Mr. Goschen's reduction effected a saving of £1,400,000 in the first year and £2,800,000 in later years; whether, in view of the fact that the bank rate has now fallen to 4½ per cent., he is prepared to adopt those predecents, and reduce the rate of interest by a rate equal to the fall in the bank rate; and, if not, whether he is prepared to consider a reduction by a smaller amount?
The operations to which the hon. Member refers were conversion operations, the essence of which was that holders of the outstanding Government Stocks were offered payment in cash at par as an alternative to conversion of their holdings into the new stocks. At the present moment such an operation, even if monetary conditions permitted, is not possible in the case of any of the larger issues of War Loans for the reason that it is part of the contract between the Government and the subscriber that the loans shall not be paid off before a fixed date. For example, the 5 per cent. War Loan cannot be paid off (except by purchase at the market price) before 1929.
Is it not a fact that the Government can borrow money from the banks at 3½ per cent. or 4½2 per cent. and pay off at par the money on which they are paying 5 per cent. to the present holders of capital?
The hon. Member is under a mistake. We can only borrow at the rate he mentions at short notice. You could not pay off long term debt with money borrowed at short notice.