. DEBT CONVERSION.
. At the present moment there is a general recognition of the desirability of the Government accomplishing a voluntary Conversion of the 5 per cent. War Loan at the first possible moment, and so long as the scheme is purely voluntary the effect should be favourable to the Exchequer without any harm accruing to the national credit or to public confidence. It is, however, very dis- turbing to find in last week's debate in the House of Lords leading statesmen referring to the possible need for an actual reduction in the scale of interest on the National Debt. Thus we find Lord Reading, in the debate which took place in the Lords on June 22nd, saying : "It might very well be that as time proceeded they would find it necessary to take some other steps with regard to the remaining E4,300,000,000 of National Debt in order to save some more in interest and in order that this figure of £276.000.000 might, not only be reduced by £16,000,000, leaving f260,000,000, but that a further reduction in interest might be made. Everything Must depend, of course, upon what happened in the future, but he could conceive circumstances in which they might find it necessary -to take very strong measures."
And later in the debate the Marquis of Linlithgow said : "He was no Socialist, but he would say that they could not hope to correct the disharmony between revenue resources and national expenditure unless they proportionately scaled down the income of the rent ier and the nominal value of the Debt."
These are cryptic utterances but clearly calculated to disturb the mind of the investor, and I certainly cannot regard them as helpful to any voluntary Conversion scheme, Moreover, if the speeches to which I have referred were somewhat cryptic in character, the same can scarcely be said of Sir Basil Blackett's speech attambridge last Saturday when he is reported as having stated : Unless the level of prices could be substantially raised, the practical limits of taxable capacity in Great Britain would not permit of payment of the internal debt charges in full for much longer, and it would become necessary (probably in conjunction with some all-round scaling down of wages and money obligations) to Scale down the interest and principal of the national debt- by legislative means."
The City does not, of course, at present take these speeches, either individually or collectively, too seriously, but nevertheless they have been greatly resented in financial circles, especially as they have come at a time when, above all things, it is desirable that the confidence Of the investor which has suffered so . many shocks should not be further disturbed.
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