DEBT REDEMPTION
[To the Editor of the SPECTATOR.]
Sm,—In his article of May 23rd Mr. St. Loe Strachey says that " we must pay our debts to the last farthing and carry out our contracts to the letter." Later he says : " But how about the contractual sinking funds and the promises to repay in full at fixed dates ? Maintain our promises to the letter."
I agree that some holders would be willing to bargain about the repayment in full at dates agreed, but in view of the con- tractual sinking funds it would be helpful if he could explain how we should be able to " substitute a charge of £6,000,000 a year under a scientific sinking fund for a delirious debt re- demption allotment of £50,000,000 a year."
From the figures made public it appears that the 250,000,000 contains at least the following items :- £14,000,000 statutory and contractual sinking fund for the 3} per cent. Conversion Loan : this is prac- tically a perpetual stock and the scheme would bring negligible relief.
£1,000,000 for capital repayments of existing terminable annuities.
£5,000,000 as the equivalent of $24,000,000 contracted to be paid to the U.S. Government : this could not be modified.
£7,000,000 for various bonds tendered under contract in payment of Death Duties at face value : such large blocks of Victory Bonds, &c., have been bought for this specific purpose that you would have to make similar provisions. £2,250,000 statutory and contractual provision for annual Victory Bond drawings : a diminishing item but of special interest on which you would save little.
£2,500,000 statutory and contractual sinking fund for 4 per cent. Funding Loan : here again you would save little.
No doubt there is also some provision against any possible calls on the statutory and contractual Depreciation Fund of the 5 per cent. War Loan. It is not clear, therefore, in view of these figures, how Mr. Strachey would propose to escape from providing £44,000,000 out of the 131,000,000.—I am, [I am afraid in my attempt to be concise I failed to make my meaning clear. I assumed that the addition of one-tenth of a £ per cent. which I proposed should be givento the nation's creditors, if they agreed to the turning of their perpetual annuities into hundred-year annuities, would be generally accepted, as that offer is one very favourable to the State creditor. The Mechanism would be an Act of Parliamen%' empowering the Treasury to issue terminable stock bearing
interest at, say, 41 per cent., and to exchange it againstf the existing perpetual annuities in such amounts as wouldl. ensure an increase of annual interest equal to one-tenth ot a £ per cent. The Act would authorize trustees and all' public and corporate bodies to make the exchange. It is possible, of course, that there might be a combined move- ment of the State creditors to defeat the scheme proposed; but I doubt it. I hope later, when Lord Colwyn's Com- mittee reports, to deal with the whole subject in detail.' The proposal which I made before that Committee is reported in the Times of Wednesday, June 3rd, page 9.—J. ST. Los STRACEIEY.1
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