I beg to move, "That the Bill be now read a Second time."
This Bill, unlike so many that we have to deal with, is perfectly simple in its character, and anyone who reads it can understand at once what it purports to do. It provides in Clause 1 (1) that the Treasury, or any person authorised by the Treasury, may issue a certificate declaring that the transfer of a security is, and always has been, valid notwithstanding the fact that it was effected contrary to the Defence Regulations. The second Sub-section provides that in the case of any class of securities the Treasury may make an Order declaring that such transfers are valid in such circumstances and subject to such conditions as it may specify. The third Sub-section provides that no such certificate or Order will affect the liability of any person to penalties under the Regulations, and the fourth provides that an Order made under this Clause may be varied or revoked but not so as to invalidate any transfer which has already been validated. In more simple language, what it does is to say that in cases where permission would have been granted if it had been asked for the Treasury may validate a particular transaction although permission was not asked for. I am sure the House will naturally give us those powers but they would like to know why we want them and what is the background of the Bill. It is not anything very serious. There is a great body of Defence (Finance) Regulations and Section 3A of those Regulations deals with the transfer of securities.
When securities are bought and sold during the war there is a certain form to be signed, as well as the transfer forms, a declaration that the transaction is not to the benefit of a non-resident. The technical meaning of a non-resident is a person resident outside the sterling area. Both transferor and transferee have to sign the declaration and there is a space for a stamp and the signature of the stockbroker or bank to show that the matter is in order. If, however, it is impossible to satisfy the Treasury that there is no non-resident interest, that permission has to be sought, and, unless it has been sought and given, the transaction is not valid. In the normal run of cases there has been no difficulty. An enormous amount of transferring actually takes place in the course of months and years, and everybody is fully aware of these Regulations and what has to be done because the banks and stockbrokers and the other people concerned in such dealings were fully informed at the time in the Press. This provision came into effect under Regulation 3A on 13th May, 1940. Hon. Members will note the date of the next thing that happened. On 17th July a further definition was put into the Regulation defining securities as including life assurance or endowment policies because, between May and July, there had been the over-running of the Low Countries and France and it was necessary to make sure, as far as we could, that there would be no leakage by which moneys would be improperly transferred outside the sterling area. It was found a year later, on 30th May, 1941, that it was no longer necessary for life assurance or endowment policies to be within the definition of securities. Therefore they were dropped, and the whole period for which we are concerned in validating improper transactions is 17th July, 1940, to 30th May, 1941, with regard to life assurance and endowment policies.
The difficulty has arisen in this way. There was no particular reason, if two individuals were effecting the transfer of a life assurance policy, for it to come under notice at the time. It is not like selling a security on the Stock Exchange or through a bank, when there would have to be a paper produced. This problem did not come to light until a later date in many cases. In other words, when a policy is presented on maturity or surrender it is the business of the company to take steps to see that the Regulation had been complied with. It was discovered that by inadvertence in many of these cases it had not been carried out. There is no particular reason why, provided the other conditions are satisfied, these transactions should not be validated. The Bill is intended to deal with that problem. There is the difficulty, unless we can validate those transactions for which there is no reason to suppose permission would not have been given at the time if it had been sought, that if there are any further transfers after this impropriety has come to light there is nothing in the law by which we can make them legitimate. The invalidity goes on for all time, although the next people along the line may have carried out the transaction in good faith and might even have applied for permission, having found out that it was necessary to get it.
We cannot tell because they may not have come to light, but it is not a very large problem. Where it has occurred, however, it is only right, always granted that they were cases where permission would have been given, that they should be validated. Where through inadvertence permission was not asked for, it is only reasonable that permission should be given subject to the safeguards of the Bill.
The second class of case is a similar class which has also come to light, and again the same thing applies. I am dealing only with cases where permission would have been granted if it had been asked for. This class of case is where transfer of or the creation of an interest in a security has taken place under a settlement. There you may have the interest created by a trust deed without the actual transfer of any security taking place. In that case the transferors and transferees would not have appreciated that they ought to have had permission. The Bill is nothing very exciting and is not likely to arouse any passions anywhere. I am sure the House will see that it is reasonable in cases of this kind, where inadvertently permission was not asked when it would no doubt have been given if asked for that we should make these transactions valid and make it possible for subsequent transactions in these securities or insurance policies to have a valid title, which, unless some amendment of the law is made, they could never acquire in present circumstances.
I should have thought that it was clear as it is. It merely provides that an order made under Sub-section (2) may be varied or revoked by an order so long as it does not invalidate anything which has been validated by that order. If my hon. Friend has any difficulty I will try and make it clearer later, but it seems to me a necessary provision. Sub-section (2) lays down the conditions and circumstances which may be necessary in making the order.
The right hon. and gallant Gentleman has not disclosed any important constitutional aspect of this matter, but he will perhaps forgive me for saying that his skill as a Parliamentarian is such that it does not always convey such a reassurance. I believe I am right in saying that no securities are affected by this Measure other than life and endowment assurance policies and certain kinds of settlements. This is a Bill to make valid retrospectively certain classes of transactions which were not valid at the time when they were effected. This touches the criminal law, as I understand. As the right hon. and gallant Gentleman knows, we consider it to be an undesirable thing to make an offence that which when it was done was not an offence. In this Bill we are doing the opposite. We are validating from the civil aspect transactions which, when they were done, were invalid, but, according to Sub-section (3), that validation does not affect the criminal liability of the party who carries out the transaction. Why is it necessary to maintain the liability to prosecution while in all other respects the transaction is validated? I do not suggest that there is any serious difficulty in the Bill there, but it is a point which might well be explained. Another point about which I would like to ask has to do with the wording of the two main operative Clauses. Why is it necessary in Sub-section (1) for the Treasury or person authorised by the Treasury to operate by the issue of a certificate, whereas in Sub-section (2) the Treasury operates by making an order? It is not a big point, but it arouses my curiosity, and I shall be glad if the Financial Secretary will explain. Subject to these remarks. I do not think there are any important objections to the Bill.
I think my hon. Friend was right when he paid a tribute to the Parliamentary skill of the right hon, and gallant Gentleman, as shown in this seemingly innocuous Measure. I was struck by two things. One was that the right hon. and gallant Gentleman had no information to give to the House about the number of transactions affected by it or the amount of money involved. The other was that he did not give us a typical instance of the kind of transaction which he had in mind. He explained the general class of such cases, but he did not know whether they were very numerous. I cannot think that the House is being asked in these days to devote part of its valuable time to discussing a Measure which is only theoretically necessary. There must have been transactions brought to the notice of the Treasury, and the House would be glad of a little more information. Another point is that the Bill seems to affect almost entirely life assurances and endowments, and indeed to affect them principally in France and Belgium. It appears that transactions of that kind that were illegal at the time have taken place in those, places. It is not now proposed, as I understand the matter, to legalise all those transactions but to validate some of them—those to which the Treasury would have consented, if application for approval had been made at the proper time, in the proper way. I would like to know on what principle the Treasury distinguishes; what kind of illegal transactions would be validated under this Measure, and what kind of transactions the Treasury would not approve?
Unlike my hon. Friend, I am prepared to suggest one such transaction. I do not know whether it was legal or illegal at the time, but I suspect that it was not legal. We know that the Government have said since that they approved of it and at some time or other gave some consent to it. The House would be very concerned if it thought it was being asked to give the Government powers under the Bill to be used to further any more such transactions. The case I have in mind is that of Marshal Petain. It appears that Marshal Petain has had a policy of assurance with a British company, an endowment policy.
I do not know whether it would help the hon. Gentleman for me to intervene, but I would like to say that, so far as I know, there was no question of transfer of policy there. The hon. Member is raising the question whether payment under a policy should be made. That has nothing to do with the Bill. It is a question of one person transferring the whole policy to another person and somebody else becoming the beneficiary. It is not the same case.
I am sure that the right hon. and gallant Gentleman will do his best to follow my argument. I am afraid I am not putting it very clearly but I think the point of it will appear. What happened in that case was that security was transferred, money was transferred, from London to Vichy. I do not know whether the right hon. and gallant Gentleman calls it a security or not, but it must have been transferred in some form. I should have thought that the document by which the money was transferred was a security. No doubt the right hon. and gallant Gentleman will correct me if I am wrong. The principle involved seems to be quite the same. The transfer of that money was, or would have been, illegal, but for Treasury consent. I am not alone in wondering why the Treasury thought that the transfer of money which was against the Defence Regulations was one to which the Government consented, and on what principle they differentiated in this case and made that which would have been illegal without their consent legal because they gave their consent. I am concerned to know whether those principles are to be applied to cases under the Bill, when the Government will be called upon to decide whether an invalid transaction was such as could have been approved by the Treasury if application had been made at the right time, or was not such a transaction. I cannot help thinking that a great deal of public opinion looks at this matter in the same way. I am utterly and completely at a loss to know why the Treasury consented to the transfer of that money. No explanation has ever been offered.
If the Bill in any way deals with the point, the explanation would be in Order, but it is not in Order to ask the Government why they consented to certain transactions in the past.
I should like to submit the point to you, Sir, in any case. I understand that the Bill is intended to give power to the Government to validate certain illegal transactions. It does not validate all those transactions. It gives the Government power to discriminate. They will consider each transaction on its merits, all of them being illegal, and they will decide that these are such as may be approved and validated and those are such as may not be approved or validated. I am concerned to get from the Government some definition of the grounds on which they will so discriminate. The Government have always had a very similar discretion under these very Defence Regulations. It is illegal to transfer any moneys to certain places or persons, or moneys of certain kinds, but the Government have always had power to waive that Regulation and to discriminate, as they will have under the Bill in similar, although not the same, transactions. I am asking whether they propose to discriminate by their powers under the Bill or not. They have done so in the case to which I am drawing attention. I suggest that the two transactions are not of the same kind, the relation between them is, nevertheless, sufficiently close to afford the House some guidance to what the Government had in mind in applying their discriminatory powers under the Bill. That is what I had in mind. If that is not in Order, I leave it at that.
I apologise for not so addressing them. That is what I had in mind. I hope I have made my point clear to the right hon. and gallant Gentleman. If he can explain the principles upon which that transfer of money to Marshal Petain, which was, in itself, illegal, was thought nevertheless to be of such a kind as to require an exception to be made in his case, so as to make an illegal transfer of money legal, and if he can recommend those principles to the House, I should be prepared to give similar powers under this Bill. But I have heard no such explanation so far. The only explanation offered by the Chancellor of the Exchequer was that this was the head of a Government with whom Canada maintained diplomatic relations. I wonder how far that principle would go? I do not propose to detain the House to make a schedule, but one could imagine a number of such circumstances. At this moment we have a great and critical military operation proceeding in North Africa which has been rendered nugatory by means of assistance rendered to the enemy by Marshal Petain's Government. Why is Marshal Petain considered to be entitled to rights to which our own British subjects, destitute in Southern France, are not entitled?
I should think that unless the Government can explain away its use of these powers of discrimination in the past the House ought to look very carefully at any new powers of discrimination of that kind which the Government asks. I would like to know whether in future the discrimination is to be applied on the same principles? This is a periodic payment that is being made. The Government, I take it, can change their minds. Do they propose to change their minds? Do they propose to reconsider it in deference to the very strong feeling throughout this country, that this was a concession which, in princple, ought not to have been made? It is not that the amount of money involved was important or that any great damage was done to our financial structure by allowing it. That is not the point. The point is the habit of mind behind it that made it possible for the Treasury to discriminate in favour of an avowed enemy of this country, when the same powers were not exercised to enable our own citizens to maintain their own children in America. I think I have said enough to make my point clear. For my part, unless we can get some assurance from the Government that its powers to discriminate will be exercised on the strictest possible grounds and that they will not be used in the same way as they have been used in this instance, I certainly cannot support the Measure.
The necessity for bringing in this Bill illustrates the conditions under which we are operating at the present time. A great many rules and Regulations are brought in by the Government, laid upon the Table and are not subject to any real control or amendment by this House. That is a matter which, I think, ought to receive some consideration. I quite understand the necessity for bringing in the Regulations, and the manner in which they are brought in, but I do not see why some machinery should not be set up, at any rate for studying them, and with power at least to draw attention to any shortcomings which may be there. That is something which, in present circumstances, the ordinary machinery of this House is not able to do. As far as I can understand, this Bill is brought in because a Regulation curtailed certain transactions which have since been shown to be reasonable transactions. Therefore this Bill has been brought in to validate these transactions. I cannot help wondering whether we shall have, in due course, further Bills to put right matters which have been overlooked in the issuing of these Regulations which are not subject to any kind of amendment by this House of Commons. We have it this Bill some opportunity for considering this matter.
There is one other point to which I wish to draw attention. It concerns Sub-section (4) and it is perhaps a Committee point, but I think it would save the time of the House if I raised it now, as no doubt an adequate explanation can easily be given. I cannot quite understand either the meaning or the need for Sub-section (4). As I understand it Sub-section (3) is the main part of the Bill which gives the power to validate certain transactions which apparently were reasonable transactions but were forbidden by Defence Regulation. When we come to Sub-section (4) it says that "An Order"—I take that to mean an Order under Sub-section (3)—
may be varied or revoked by a subsequent Order made thereunder.
Apparently the original wrong act, having been validated under Sub-section (3) can, as I understand it, be again revoked under Sub-section (4). That Sub-section even goes on to say:
but not so as to affect any act validated before the variation or revocation takes effect.
That seems to me the difficulty because there is no need to validate any act under Sub-section (3). I am very sorry that some of my hon. and learned Friends are not here to take up this point. I suppose it would be quite understandable to them but I am one of those who think it desirable that legislation which passes this House should be understood not only by those in the learned profession of the law but should be reasonably understandable by ordinary persons who, ultimately, will be controlled by the legislation which is passed. I may not have been able to explain my difficulty in understanding this, but I certainly cannot understand it. I trust that, before the Second Reading is given, my right hon. and learned Friend will have given us some more detailed explanation of the meaning of Subsection (4) and of the need for it.
I hope that this Bill will be passed. It clears up trouble which has arisen in a great many cases. But it has not been made clear to me how the trouble which we are trying to clear up originally arose. I should like to know whether it arose from a mistake in drafting, and the inclusion of securities which ought not to have been included, or through the issue of an order in regard to them which ought not to have been made at all. Will the Treasury now be involved in dealing with every individual case on its merits? One rather gets that impression from the statement that the Bill will be applied only to cases in which leave would have been granted had it been asked for. It seems to me that that would involve a great deal of work. Cannot the same procedure be taken as is taken to validate all marriages which have taken place in a building which has been subsequently discovered not to have been licensed?
I can assure the hon. Member for Nelson and Colne (Mr. Silverman) that the Government, in introducing this Bill, have no ulterior motive. I was not trying to conceal anything from the House. I can honestly say that I never have tried to do so. If I did, I should not succeed while the hon. Member is here. There is no great difficulty about Sub-section (4). It is common form when we have a paragraph in a Bill dealing with an order. I was asked what is the difference between a certificate and an order. The first Sub-section says that the Treasury "may issue a certificate," and the second says that the Treasury "may make an order." A certificate is a document attached to a particular transaction. The second Sub-section says that the Treasury may make an order with respect to any class of security
declaring that in such circumstances and subject to such conditions as may be specified in the order …
The order lays down the general terms and conditions which govern the procedure. That being so, it will be seen that it may be right to modify the order if there are other conditions or circumstances which one might want to cover later on.
Suppose the order says that in order to get any transaction made valid you have to obtain a blue paper by a certain date, you may want later on to change that date or to change the colour of the paper from blue to red. The second order will then revoke the first. The order will not affect the validity which has been given to the transaction under the order first granted. I hope that that is clear.
The intelligence of my hon. Friend is not so limited as all that. My hon. Friend the Member for Great Yarmouth (Mr. Jewson) asked how this difficulty arose. It was not through any error in drafting. When the Amendment of the definition of a security was made in July, 1940, there was no difficulty. The difficulty has arisen probably because it was not sufficiently appreciated that some of these transactions might occur without anybody being notified. People may have transferred without notifying anybody, because they did not know that this regulation affected them. Ignorance of the law is no excuse, but we say that when a mistake of this sort is made, through ignorance, the transaction should be made valid. Some thousands of cases have emerged up to now, but one cannot tell what the total will be. These transfers occurred during a particular period of time. Some may not emerge for a long while. The hon. Member for Nelson and Colne raised the whole issue, which I do not think was relevant to this discussion, of the payment of certain moneys to somebody or other, which he said was contrary to the general Finance Regulations.
That matter has nothing to do with this Bill, which deals merely with securities. The hon. Member is raising quite another matter, which may be a very profitable subject for discussion on another occasion, but about which I am not now prepared to make any statement further than that which was made at the time by the Chancellor of the Exchequer.
I do not want to press the right hon. and gallant Gentleman unduly about a matter which is not really of first-class importance, though it raises a serious principle. But the right hon. and gallant Gentleman says that that matter is not affected by this Bill. It is affected by the principles of this Bill, which give the Government the same kind of power to discriminate as to which transactions they will validate and which they will not. I suggest that I am entitled to ask on what principles this discrimination will be exercised, having regard to the instance on which I have made one or two comments. Having regard to the feeling that has been produced in the country, we are entitled to ask whether it is those principles that will be applied.
All I can say is that, if the hon. Member refers back to what was stated on that -particular case, I think he will find that it was made clear by my right hon. Friend that that was a wholly exceptional case. It is not really relevant to this Measure.
My recollection is not quite clear, but I think the matter was treated as an exceptional case. We are dealing with cases where the transfer has taken place between residents in this country, not where there is a non-resident on either side. There is not really any matter of principle involved as to how we are going to deal with them. The difficulty that the hon. Member has in mind arises in the case of a non-resident. So far as there was any discretion which could be used to deal with that case, which is a discretion covering the whole procedure, that discretion is not affected by this Bill.
I think this matter is becoming more obscure. My right hon. and gallant Friend gave us some examples. He has a discretion in individuals, and a discretion in classes of cases—under Sub-section (1) in individual cases and under Sub-section (2) in respect of any class of cases. Surely we can have some enlightenment thrown upon the matter.
I am sorry if I am not making it clear because I do try, and I apologise to the hon. Gentleman. In the normal run of cases where the purchase of securities is dealt with there is no question of discrimination by the Treasury and no principle involved.
I was dealing with a non-resident case, and the right hon. and gallant Gentleman replied that this had nothing to do with non-resident cases. Now he says that it has. In those nonresident cases where the Government have a discretion, will they exercise it in the same way as they did in the non-resident case?
I understand the difficulty of my hon. Friend the Member for Nelson and Colne (Mr. Silverman), but do the Treasury require to take into account purely personal considerations such as the views of "A" because he is considered to be loyal, or "B" because he is considered to be a disloyal person, or if he is someone with whom, for some reason, you wish to maintain specially favourable diplomatic relations? I do not suspect for a moment that there is anything here that the right hon. and gallant Gentleman does not wish to disclose, but in order to pass the Bill on Second Reading we ought to know the principles upon which the Treasury are going to operate.
If during this period there had been a transfer of a policy which had been brought to notice and which had a non-resident interest, this regulation would deal with it. That is the sort of case in which permission would not be granted. [Interruption.] The hon. Gentleman the Member for Nelson and Colne (Mr. Silverman) will keep bringing in that particular case. As has already been explained, it was a wholly exceptional case. I do not think the members of the general public who have dealings with us on these Regulations regard them as other than most rigid. I need only instance the numerous questions, some of which I believe the Member himself has asked, concerning the transfer of funds to Canada and the United States in respect of children out there.
The general answer to the question is that all these cases are dealt with most rigidly. He has instanced the one case where wholly exceptional treatment was given for reasons that have been explained in this House. But generally speaking there is no intention whatever of dealing with cases in that sort of way. It is really only the harmless cases of transferor or transferee in this country, who unfortunately did not ask for permission at the time, whose cases will be validated if this Bill is passed. I really can assure him that the case that he instanced was so exceptional that he would have to wait a long time before he found anything at all comparable. I hope that that explains what the hon. Gentleman the Member for North Aberdeen (Mr. Garro Jones) had in mind.
I feel compelled to say that, having regard to the fact that the right hon. and gallant Gentleman has not really clarified the mind of all of us on this matter, he ought to be prepared to give a more detailed explanation on the Committee stage and also to answer the question which I put to him with regard to Sub-section (3) of this Measure.
The hon. Gentleman raised the question of whether it was a criminal offence, but here it is really not so much a case of offences because they did not ask for permission, but really that the transactions are ineffective. Where something has been done which is wrong and involves a penalty under the Regulations, that obviously would not be affected, and that is what we are dealing with here. That is why we say that, if there was liability to penalty, it is not affected by the Bill. I will try and make the matter clear later on, and I hope at the same time the hon. Gentleman will help me by not trying to cloud the issue.