Letter: The compensation of Bank of England stockholders (1946)

Letter to the Editors from the January 1946 issue of the Socialist Standard

(We have received from a correspondent the following letter, which we consider will be of interest to our readers.— Ed. Comm.)

Sir,—A few facts regarding the compensation terms given to Bank of England stockholders might be of interest to your readers. The unit of Bank of England stock is £100. It was quoted on the Stock Exchange recently at £382. Stockholders have been receiving 12 per cent during the past 20 years. The Labour Government proposes to give stockholders, in exchange for their Bank stock, four £100 units of Government stock, equal to £400 for each unit of Bank stock. This new stock will have the guarantee of the State behind it. At 3 per cent. the Government stock will give the same return as Bank of England stock, namely, 12 per cent. The new stock is redeemable in 1966 at the option of the Government. I have found; Mr. Editor, that many Labour Party supporters conclude that at the end of 20 years the stock will be cancelled without the stockholders receiving anything in return. This, of course, is not the case. It is not surprising that such a misconception should have arisen. Several Labour journals did not appear over anxious to explain the details of the compensation terms. Journals devoted to the interests of investors appear to have been more liberal in giving details of the compensation terms. For example, the following appeared in the "Investors' Chronicle," 13th October, 1945, page 444: "So far as holders of Bank stock are concerned, in the circumstances of the case the provisions are satisfactory. They will receive £400 of 3 per cent. Government stock for each £100 of Bank stock. They will have the same gross income as they had before. . . . But the new Government security is not redeemable till 1966, and then the redemption is optional. . . . In other words, present Bank stock looks as though it is worth little short of £400 on the compensation terms. On news of the terms. Bank stock rose to a record level of 390-395."

It seems clear that the redemption terms mean that in 20 years' time, if the stock is redeemed, the stockholders receive roughly £400 for each unit of Bank stock formerly held. Should redemption not take place in 1966, then the stockholders continue to draw their usual 12 per cent, until the stock is redeemed.

Hoping the above facts will be given wide publicity, and thereby help to remove a misconception from the minds of many well-meaning supporters of the Labour Party.

Yours, etc.,

D. A. (Glasgow).