"(a) buy or sell any stock, shares or other securities except for cash or when the purchase or sale takes place in any recognised Stock Exchange, subject to the rules or regulations of such exchange.
"(b) buy or sell any stock, shares or other securities which have not remained in physical possession in the United Kingdom since the 30th September, 1914.
"(3) A licence granted under this regulation may be granted subject to any terms and conditions specified therein.
"(4) If any person acts in contravention of this regulation, or if any person to whom a licence has been granted under this regulation subject to any terms or conditions fails to comply with these terms or conditions, he shall be guilty of a summary offence against these regulations.
"(5) In this regulation the expression 'securities' includes Bonds, Debentures, Debenture stock, and marketable securities."
It will be seen at once that the terms of this document, on any interpretation of them, go far beyond the intentions expressed in what may be called the official preamble and in the new Committee's terms of reference. One of the clauses seems, with all deference to its august composers, to be merely silly. This is (1)(c) forbidding sub-division of securities. If a £10 share is split into ten £1 shares this operation cannot make the smallest difference to the supply of capital for essential industries or cause any drain on the Foreign Exchanges. I am assured by those who have delved into the official intention that the reason for the objection of the old Committee to splitting schemes, on which this new prohibition is based, was that splitting made shares more marketable and popular and so more likely to compete with War Bonds. But a mere sale of shares, split small and so popularised, does not absorb any capital. That only happens when, money is put into some new form of industry. If A, who holds ten £20 shares, is enabled to dispose of them to B because they are split into 200 £1 shares, then, A instead of B has got the money and has to invest it in something. The amount of capital available for investment is not diminished by a halfpenny. This regulation is just a piece of short-sighted tyranny which exasperates without doing the smallest good to anybody.
More serious, however, was clause (1)(e) under which any securities that have been issued, split, consolidated or renewed without Treasury sanction since January, 1915, were not to be dealt in, in future, without a licence. The result of this clause, if it had stood, would have been that all loans under which such securities had been pledged would have had to be called in because the collateral became unsaleable, except after all the ceremonies had been gone through and a licence had been got. It was also possible to argue that the prohibition to renew or extend the maturity of any security meant that no loans of any kind could be renewed, and that no commercial bills could be renewed, without a licence. It is true that No. 5 paragraph says what the expression "securities" includes, but it does not state definitely that bonds, Debentures, Debenture stock and marketable securities are the only things included. It was a pretty piece of drafting, and raised a pretty storm in the House of Commons on February 27th, when a somewhat lurid picture of its effects was drawn by Sir H. Dalziel and Mr Macquisten. Mr Chamberlain not being then legally a member of the House, it fell to the lot of Mr Bonar Law to explain that the Government had really meant to give greater freedom, in making new issues, that the evils anticipated had not been intended, that he hoped the House would not judge the Government too harshly for not making unsanctioned issues illegal from the beginning, and that a new Order would be issued removing the retrospective effect of the new regulation. And so amendment was promised of a measure which would have had very awkward and unjust effects. It may be argued that it would only have affected people who had done, during the war, what they were asked not to do, namely, make issues without Treasury sanction. If the old Committee had been a reasonable and expeditious body this argument would have had great weight. But, in view of its caprices and dilatoriness, there was a good deal of excuse for those who decided to do without Treasury sanction and take the consequence of being unable to market their securities on the Stock Exchange. To propose to add a new penalty and cause the cancelling of all the financial arrangements made in connexion with such issues during four years was simply piling blunder on blunder. Luckily, the protests of the Government's own supporters sufficed to undo the worst of the mischief; but the whole affair is only another argument in favour of the earliest possible ridding of finance and industry from control that is so clumsily exercised.
XX
MONEY OR GOODS?[1]
December, 1918