Letter: Wicked Uncle

A reader in Canada writes asking for information about the nationalisation of the Bank of England. His letter and our reply are printed below.

Victoria, B.C., Canada.
July 11th, 1955.
Dear Comrades,
A reformist friend of mine claims that when the Bank of England was nationalized, a 90 per cent. tax was imposed by the Labour Government upon the Government stock, thereby leaving the bondholders with only one-tenth of what they formerly owned. I can’t see a Labour Government being so unkind to stock or bond-holders.
I showed my friend the affixed letter taken from the January ’46 Standard, and he said the tax must have been imposed after nationalisation, because he has an uncle in England who was a shareholder in the Bank of England, and he lost “just about” everything through nationalization and the imposition of this tax.
If it doesn’t take too much of your valuable time, I would like to get the facts on this matter.
Thanking you, I am.
Yours for ours,
J. G. Jenkins.

Reply
Our correspondent provided his friend with a copy of a statement published in the Socialist Standard of January, 1946 (not reproduced here), which explained the compensation terms given to Bank of England stockholders. The basis of the compensation was to give the holders Government stock sufficient to provide the same return as had been paid by the bank on average in the previous 20 years, i.e., 12 per cent This was done by giving them £400 Government stock yielding 3 per cent., in return for each £100 of their bank stock paying 12 per cent. The Government stock is redeemable by the Government in 1966, so that the stockholder will then or after be paid off at £400 for each £100 bank stock that was originally held.

The story given by uncle to his nephew is a pure fabrication. There has been no such tax imposed on his stock, either of 90 per cent. or any other figure, except, of course, income tax, which is, however, lower now than it was then. Can it be that uncle just wanted to plead that he is hard-up?

The utmost that he can say is that the present higher money rates have depressed all gilt-edged stocks. The stock given to Bank of England stockholders is at present down to about three-quarters of its nominal price so that if uncle had to sell now he would get about £300 for each £100 he originally held of Bank Stock. But this is a temporary situation. When money rates fall again the price, will recover and in any event he will receive the full £400 on redemption in 1966. And in the meantime, irrespective of fluctuations of the selling price of the stock, he goes on receiving his £12 a year on each £400 stock, in place of the original £12 on £100 of Bank Stock.

Ed. Comm.

Answers to Correspondents

C. Luff (British Columbia). Many thanks for letter. Hope to deal further with currency in later issue.

E. Littler (Ashton-in-Makerfield). We will deal with the problem you pose in a later issue.
Ed. Comm.