The subject I bring before the House in this debate is not a very happy one, but before I proceed further with this sad story, I should like to say, Mr. Speaker, that I am glad at any rate to have this last opportunity, on a day which is in this sense historic, to speak under your chairmanship. I say that to you not because I want to gain any favour under the rules of order. I know that I must not refer in an Adjournment debate to matters which entail legislation. Specifically, I must not refer to the Mersey Docks and Harbour Board (Capital Reconstruction) Bill, which is currently before the House. Nevertheless, I am sure that I cannot be blamed if the existence of that Bill is in the minds of hon. Members—it is not something I can prevent—and inevitably it may be taken by the House as, in a sense, the background to what I am saying.
Nevertheless, I am basing my case on the Government's action in moving for the appointment of a receiver of rates, now granted by the courts, and an issue which is therefore no longer, as it was when we debated the subject on 1st December, sub judice. The object of the Government in moving for the appointment of a receiver of rates was stated by the Minister for Transport Industries on 30th November. He said that it was being done:
… to protect the financial interests of the Government and the other secured creditors."—[OFFICIAL REPORT, 30th November; Vol. 807, c. 905.]
I will argue that it fails to do this adequately, in respect, at any rate, of the other secured creditors.
During the debate on 1st December, when the House considered the situation then facing the Board, the right hon. Gentleman said that
… investors who make mistakes are apt to lose their money."—[OFFICIAL. REPORT, 1st December, 1970; Vol. 807, c. 1096.]
His remark in this context has caused considerable offence to many investors in the Board and in my view is not appropriate to the case—especially perhaps not in the case of the small investors who invested in the Board because they wanted security. They were not going in as a gamble. They were not investing in equities for the purpose of making a capital gain. What they wanted was security and they thought that that security was what they had achieved.
I think that the Government's decision in this matter has been wrong and that they should change their minds. What I am trying to do today is to persuade the Government to change their minds. They have at any rate one precedent for changing their minds on this issue. In an editorial on 1st December, discussing the Government's decision against the background of the Government's disengagement policy, The Times said:
If disengagement is to be a meaningful philosophy, then a start has to be made somewhere and given the Government's declared objectives then the Mersey Docks and Harbour Board is probably as good a place to begin as any.
However, after maturer reflection, which this issue clearly needs, in an editorial three days later, on 4th December, 1970, The Times said something very different:
By the tenets of free enterprise investors in ordinary shares bear the risks and the rewards of business. It is unfortunate, therefore that the first victims of Government policy are investors in fixed-interest debentures and bonds in Mersey Docks. And it is doubly unfortunate that a question mark has thus been raised over the security of semi-official borrowings in the bond market.
In its final few sentences, the editorial continued:
But, if Mersey is a special case, the Government should pay the cost of making it an exception. What they cannot do is to confuse the principles of free enterprise with noncommercial practice—particularly at the expense of investors who have chosen safety rather than risk in the placing of their funds.
The House will agree that that represents a change of attitude to the problem by The Times after considering the implications of disengagement. The Government
should follow the example of The Times and change their mind.
It has been argued that if, some time during the last 112 years that the Board has been established, somebody had read the small print of the Board's statutory constitution, they would not have made the mistake of believing it to be a virtually gilt-edged investment. They would have found that it is less secure than many equity investments and that borrowing by the Board is secured only by the rates, which are not the whole of its income, and not against the assets of the enterprise.
I hope that the Government do not want to go down in history as one in respect of whose actions the small print has to be read. I do not accept that argument. There are reasons for not accepting that argument as a correct interpretation of the Board's position. It was established in 1858 as a statutory trust, and in 1965 there was a Revision Order introduced by the Minister of Transport under the Harbours Act of 1964. Under that, four nominees of the Minister of Transport were appointed to the Board, which indicates, at any rate, some Ministerial responsibility. This is an investment falling within Part II of the First Schedule to the Trustee Investment Act, 1961. For a very long period investment in the Board has been as secure as, one would once have said, an investment in the Bank of England.
There is, however, an additional reason for rejecting this interpretation of the security of an investment in the Board's loan capital, the interpretation that people should have read the small print and understood the real statutory position. The additional argument arises from the impossibility of the situation which occurs if the Board falls into financial difficulties. Under the Statute, the Board has to function: it has to function even if it has inadequate finances. There must have been an entirely justified assumption that, if this impossible situation arose, the Government or Parliament would act to relieve it in a way which would not be at the expense of the holders of fixed interest secured debt. If investors had taken any other view, they would not have invested in the Board other than on very high risk terms. In that event, the Govern- ment would have been compelled, sometime during the last 112 years, either to have given a Government guarantee to investments in the Board or to have found some other way of increasing the security of investments made in it.
The Government's action in this case is an outrage. That is the strongest word which I propose to use, for the simple reason that I am hoping that hon. Member's opposite may find it possible to support what I am saying, and I do not want to make it more difficult.
Hon. Members will have seen letters in The Times and other newspapers from bondholders of the Mersey Docks and Harbour Board, expressing their views on the Government's action, and I am sure that other hon. Members have received similar letters from their constituents. Since it became known that I was to raise this matter, I have received letters not merely from my own constituents but from those of other hon. Members.
I shall quote a few extracts from those letters. I shall not give the name of the writers. A doctor living in Ealing writes:
Last January my mother invested in the Mersey Port and Harbour Board 9¾ per cent loan to be repaid in January, 1972. She was invited to invest money by the Board, having invested in a previous loan.
The doctor continues:
My mother in common with a great many other people, would not risk her money in equities and would certainly never consider the more speculative type of share, as she relies on the interest she receives for income on which she lives. She regarded the Mersey Docks as completely safe, and comparable with the many Local Authority loans offering a similar rate of interest.
I am writing this letter on behalf of my mother, as although she insists on being independent and lives alone, she is elderly and half-blind, and consequently finds difficulty in writing letters.
I quote an extract from a letter which I have received from one of my constituents:
I am not in a position to lose this amount. I will find it very difficult to be without the dividend I have been receiving. I do trust that this Bill that you have to be considered on Friday …"—
the lady evidently does not understand the procedures of the House—
… will to some extent relieve the anxiety of many of us who have money in the Board.
I hope that when the hon. Gentleman replies to the debate he will tell us exactly what the position will be, not merely in respect of the deferment of repayments of bonds but in respect of interest payable on the bonds before repayment.
Lastly, I quote a letter which I have received from a gentleman living in Southport:
I am a holder of a small sum in these Bonds and am therefore interested. The attitude taken by the Government in this matter is, in my opinion, the most shameful action ever taken by any British Government. I have always held the impression that these securities carrying Trustee status and issued by a Public Trust whose borrowing is at all times controlled by the Government, were completely safe, both as regards to capital and interest.
Other hon. Members will have received similar letters and will have been able to judge the reaction of these bondholders, who are aware of what is happening to them as a result of the Government's decision.
Another reason why the Government should reconsider their decision is the effect it may have, and I believe will have, on the cost of borrowing by public boards and even local authorities. I have been in contact with various people who could advise me on that. I should like to quote a paragraph from a letter I have received from a firm of City solicitors which advises one of the bodies involved in this case Again I will not mention the firm. I do not think that it would object to my doing so, but it does not say specifically that I can. Its letter says:
In the light of the foregoing, it has become clear to our clients that investment in the Mersey Docks and Harbour Board and other similar statutory undertakings, though long regarded as a safe trustee investment at fixed interest, in fact involves a very high degree of risk. Investors, in the absence of legislation to improve their security and facilitate the enforcement of their remedies, cannot be expected to provide further funds for undertakings such as this. It is our clients' view that the market's confidence has been completely lost and that undertakings such as statutory boards and even local authorities will, unless confidence can be restored, soon find it virtually impossible to raise money from many of the most important sources upon which they have hitherto been accustomed to rely.
What consideration have the Government given to this point?
I am glad to see two Treasury Ministers present and that they are listening to what I say, even though I understand that neither is to reply to the debate. I gave notice that I would be asking this question, and I hope that the Under-Secretary of State for the Environment will be able to deal with it.
What estimate, if any, have the Government made of the effect of downgrading the security offered by the Mersey Docks and Harbour Board on the future cost of borrowing by local authorities and public boards? Let me take the Port of London Authority as an example. What will it add to the cost of funding its debt? Will it add anything? What estimate has been made on this point?
What effect will there be on the cost of borrowing by local authorities? What effect will this decision have on the cost of borrowing by the Government? I have heard indirectly of one stockbroker who has been advising his clients to move their fixed interest holdings out of public boards and local authorities into Government stock. That may help the Government, but is that the Government's intention? What estimate have the Government made on this point?
On the first point, about the effect of this on public boards, do the Government agree with what the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd), with his great authority as a former Chancellor of the Exchequer, said in this House on the 1st December:
It is also a pity that the nature of the Government's plan should affect the credit worthiness of port authorities generally. If matters remains as they are, I doubt whether port authorities will be able to raise money in the future without some kind of Government guarantee. That ties round the necks of future Governments the responsibility for raising capital for port developments, and perhaps that was not the intention of this exercise."—[OFFICIAL REPORT, 1st December, 1970; Vol. 807; c. 1107.]
What view do the Government take of what the right hon. and learned Gentleman said on that occasion?
I have one final question. During the proceedings in the court preceding the appointment of the receiver of rates, it appears from reports that assurances were given by the Government to those who initially were opposed to the appointment of the receiver of rates and led to those bodies withdrawing their opposition. What assurances were they? What did the Government do which led to the withdrawal of that opposition? I hope that the hon. Gentleman can tell us that. Certainly it has not been made clear heretofore.
I have tried to make my point as moderately as possible so as not to make it more difficult either for the Government to change their mind or for hon. Gentlemen opposite who are inclined to support my plea. The Government must think again.
Naturally, my personal concern is mainly with small investors who sought security and who cannot afford the loss that this will cause them. I never thought it possible that a Government of this country other than, perhaps, in a period of great national crisis, would do anything like this. I beg the Government to think again.