I beg to move, "That the Bill be now read a Second time."
The Public Works Loan Commissioners lend money to the smaller municipalities and public utility bodies. The House well knows that it is desirable, in their own interests, that the smaller municipalities should not have to go into the public market and raise loans for the needs of their locality. The Public Works Loan Commissioners is a body established so long ago as 1875. They are "fed" with money from year to year so as to lend it up to a limited maximum. The Commissioners provide loans for such local bodies as require them, and have obtained authority from this House to get these loans. I think the whole House knows that the Public Works Loan Commissioners are a voluntary body, and that this House and the country are very highly indebted to that body of expert business men who are quite unpaid, and who give their services gratuitously in the interests of the country. The amount it is proposed the House should assent to this year is a sum not exceeding £20,000,000. The House may like to know that on the first introduction of this Bill the amount was originally arranged, so that the repayment of the loans would gradually make it unnecessary to come to the House for fresh loans and for fresh money. As the municipalities paid off their loans and thus allowed the Commissioners to accumulate money, they were able to make further loans to those who desired them.
So it happened that between 1902 and 1920 there was no necessity to bring in this Bill in order to enable fresh sums of money to be expended. However, in 1920 a great housing program began in the country, and very large sums of money passed through the hands of the Commissioners to those needing it. In 1920, £15,000,000 worth of stock was issued; on 21st January there was another £15,000,000; on 21st November there was £20,000,000, and on 22nd January last year £30,000,000. This year we hope to get through with this £20,000,000. I think the House will see that this is the best and most economic way possible of providing money for the smaller local authorities. There is only one other thing I should like to mention and that is that the second part of the Bill relates to an unfortunate Scottish harbour for which work £10,000 was borrowed from the Commissioners in 1907. The authority got their harbour built. I make no observations upon that, but unfortunately they were unable to repay the lent money. If the local authorities or whatever the body concerned is unable to repay it, the Exchequer—
No, the House lets them off. The Exchequer provides the money to be put in the Bill for the Public Works Loan Commission. In the case of the unfortunate Scottish harbour authority, the Eyemouth trustees, to which I have referred, who are unable to pay the portion of their loan owing, we are asking the House to remit it. There is £200 principal and £131 17s. interest.
I feel I owe an apology Mr. Speaker, for addressing a few words on a Bill, which I understand, usually goes through without discussion. In the course of his observations, the Financial Secretary referred to the housing scheme, and the activities of the Public Works Loans Commissioners in connection with it. In my own constituency there is a Public Utility Society which has built houses, and it is part of the business of the Public Works Loans Commissioners to make advances purely on a business footing. I would submit, however, that when we are considering social problems we are unable to consider them entirely as questions of what is strictly good business. The principle of my contention has been admitted by the Housing Bill which we had before the House the other day, when it was made clear that the equity of the case had to be considered. At the times the Public Works Loans Commissioners gave these loans they advanced a great majority of the money at a rate of 6½ per cent. interest. If the Treasury had taken means to secure a retrospective reduction of this 6½ per cent. interest to say 5 per cent. it would have meant that instead of the money the Treasury was prepared to make available being spread over all the public utility societies, it would have been concentrated on those societies which were in the particularly unfortunate position of having to borrow their money at a time when they could only get it at 6½ per cent. Later borrowings were able to be made at 5 per cent., but if what I suggest had been followed out, all the benefit would have gone to the poorer societies instead of the bankrupt and prosperous societies being treated practically the same way. Under the present scheme subsidies are given by the Minister of Health to the societies in the form of raising the rate in 1927 from 30 per cent. to 40 per cent. of the annual loan charges, the rate of subsidy till 1927 being 50 per cent.
In the case of the houses in my constituency to which I have referred the rent is from 17s. to 19s. per week in addition to which there are many other burdens—which everyone in this House will appreciate—and although a drop of perhaps 3s. 6d. per week would be at once involved—as the rent is based, at the orders of the Public Works Loans Commissioners, on the average over the whole period of the loan—yet none the less it is perfectly plain that this is not an equitable solution. There is an alternative under the Bill, whereby the societies may, by the subsidy being capitalized, purchase their houses which is an advantage in itself, but in this case, involves raising about £30,000 of fresh money at poor security. I should like to point out to the Financial Secretary the way in which these two schemes—the scheme which I consider would have been more desirable and the scheme which we adopted in respect to the Housing Bill—operate. Under the present scheme of the Housing Bill, a society which receives a loan of £1,000 and borrows the greater part of its money at 6½ per cent. would gain an extra £6 10s. and the lucky ones who borrowed at 5 per cent., an extra £5. Under the schema whereby the Public Works Loans Commissioners would reduce their interest retrospectively on the loans they made, the worst societies would get £15 extra and the lucky societies nothing. That, to my mind, is right and equitable. The whole of the concession would thus be made for the benefit of the societies which are in the worst and most distressed condition, and it is with the intention of meeting those cases that this Clause in the Housing Bill was made. Therefore, I consider the money is not being spent in the way intended to be by practically the same amount of money being given to the fortunate as to the less fortunate societies. There is another side to this matter, in that these poor terms have the result of making the Public Works Loans Commissioners the possessors of the mortgage on what I may call semi- bankrupt house property. The whole fact of the matter is that these schemes which receive their assistance from the Public Works Loans Commissioners, were initiated at the most inauspicious moment possible for creating garden suburbs and such like with any chance of success. The houses were built at the very top of the market, and the result is that all over the country you have side by side identical houses, one costing £1,450 and the other £450, and often less. There is no doubt that the high rents which these tenants have to pay in the garden suburbs are the economic rents, but you can imagine the discontent which is caused, and which anyone of us in this House would feel, if we were so placed, when you consider the great difference in the amount of the just—I suppose we must call it so—rent which has to be paid for two houses exactly the same, and when such houses built under the Local Authority schemes all rented at 12s. 6d.; and besides the heavy burdens of these high rents, the tenants have the burden of the rates and lighting and all the other expenses connected with their house. The Financial Secretary said in his speech, that when obligations to the Public Works Loans Board could not be met, the Treasury had to make it up; unscrupulous people might well seize advantage of this statement, to proclaim their inability to pay their rents, and tenants may ultimately be forced into such a position.
I submit that these are cases in which someone has to cut the loss, and I think it is up to the Treasury to take up this matter. When the Financial Secretary replies probably he will accuse me in the terms he used when speaking on the Finance Bill, of having no care for economy and being one of the many hon. Members who are always coming to this House asking for more money. To some extent that remark might be made when anyone discusses anything involving the expenditure of money, but I would point out that I am not now urging the launching out of any new legislation for spending money, which is where in the main we should consider economy, but that we are dealing with a situation which is past history and nothing can possibly alter. These burdens have to be shouldered by somebody, and the point is, who is going to shoulder them? It is the duty of every section of the community of this country to shoulder its fair share of the burdens of bad times, while they are on—indeed I hold this most strongly—and you cannot make concessions to one without making them to another, and the whole of the population has to pull its weight; but I would point out that the rents which these poor, wretched tenants in the garden cities, have to pay are based on the conditions of 1920 and 1921, and, unlike the rest of us, they will go on bearing their burden of these bad times till kingdom-come, however prosperous, times may be in future. I think that is a point which the Financial Secretary should consider in deciding whether the policy embodied in the mandate given to the Public Works Loans Commissioners is necessarily the right one.
The other day I was glancing through a remarkable book written by Lord Milner—whom I regard as one of the greatest Statesman of the day—and I was interested to see what he wrote upon the question of economy. He has had very large experience in business and political affairs, as hon. Members all know, and I would recommend them to read—the book is in the Library—what he has to say about economy running riot in 1921–1922, and how it very often means no economy at all. I need only recall the orgy of expense, which I believe to have been absolutely necessary, involved to the country in meeting the great industrial dispute of 1921, to show how much more expensive and uneconomical, discontent is than anything else. I perfectly sympathise with the Financial Secretary's difficulties, but specially in the interests of economy we have to make absolutely sure that the money we are paying out is spent in the best possible way. When the Treasury decided that the distress, but that is not a strong enough word—I must say disaster—to these tenants in the garden cities was so serious, it was not a good thing that the benefit given should be spread over all the societies, instead of being concentrated on the weak parts. I apologise for taking up so much of the time of the House, but I felt that it was my duty to bring those points forward.
The Noble Lord who has just addressed the House indicated that as a rule this Bill did not require much discussion, but I think he will agree with those on this side when we say that, on this occasion, there are exceptional circumstances connected with the Local Loans Commissioners and the funds placed at their disposal which would justify some discussion. I am not very clear, in the first place, as to what is exactly involved in the second part of this Bill regarding the unfortunate harbour at Eyemouth. It has been asserted that my Scottish colleagues are not likely to make any comment on this point, which will help to redress the injustice to our country, it has been hinted that we should calmly put this money into our pockets and say no more about it. There are, however, much more important parts of this Bill, and the first point of substance to which I wish to draw attention is the way in which the fund at the disposal of the Local Loans Commissioners has been built up within recent years, and how far the present proposal of the Financial Secretary is affected by the recommendations of the recent Committee dealing with the allocation of the War Savings Certificates and the Clause which was incorporated in the Finance Bill a few days ago.
The House will remember that a year or two ago it was arranged that half of the proceeds from the sale of National Savings Certificates in this country should be set aside for addition to this fund in order that they might be used in the localities for housing and other purposes, the idea being that in that way local thrift would be stimulated, because people would see houses being provided as the result of their effort and enterprise in the locality. When the housing problem was suspended—and this bears indirectly on what the Noble Lord has just said—there was an accumulation of money at the disposal of the Local Loans Commissioners to such an extent that it was necessary to appoint a Committee to consider whether, in the national interest, this allocation of half of the proceeds of that sale should be continued, because the effect of that allocation was to withdraw from the use of the Treasury and the Government a considerable sum of money which quite clearly, in view of all the existing financial circumstances, they should have freely at their disposal. We in that Committee of the Treasury made a certain recommendation, and I wish to find out how far that recommendation has been adopted by the Treasury. It was to discontinue the precise allocation, but to retain the principle which was in force, and, of course, not to penalise the local authorities. I wish to know how far that affects the proposal we are now considering. On that, I think, I express the feelings of all my colleagues when I say that we wish to encourage the principle which is embodied in the work of the Local Loans Commissioners, but we believe that it could be very considerably improved.
What is the kind of improvement which we have in mind? The Local Loans Commissioners have the fund which comes to them from the National Debt Commissioners, and that fund is replenished from time to time, partly by new loans which may be gathered up, and partly by repayment of outstanding loans. That is the way in which, broadly and generally, this fund is recruited. The money is then lent under the regulations of the Local Loans Commissioners to the local authorities of this country for all the approved purposes in which they engage. In practice—and this is a very important consideration this morning—the larger local authorities have ceased to have recourse to the Local Loans Commissioners, and the smaller authorities, who have recourse to them, are making criticism or complaint to the effect that they might be accorded rather better terms than they now enjoy under this scheme. I make no particular point of the position of the larger local authorities, because I remember very well the evidence which was given before us in a Treasury Committee on this matter, when they made it perfectly plain that in many cases they could raise money in the open market on much easier terms than the Local Loans Commissioners could offer. The late Sir Thomas Munro made the very interesting remark before a Treasury Committee that the County Council of Lanark, which is one of the largest local authorities in the country, were being offered more money every week than they could take up at 3½ per cent. as against the 5 per cent. of the Local Loans Commissioners. Not only because they could get the money very much easier in the open market, but also because they refused to subscribe to what they considered rather difficult conditions, they did not apply to the Local Loans Commissioners at all.
Let us consider the position of the smaller local authorities in this country, because that is really what is at stake. The Public Works Loans Commissioners, so far as we were able to ascertain in that Committee, quite properly have to keep in view that they are handling public money. They have also to be perfectly satisfied that they have got reasonable security for the loans which they advance. My difficulty turns very largely on the kind of conditions which they lay down. Clearly, if you have in a locality a very heavy burden of debt, a high rate, a mass of unemployment, and a great many other difficult conditions, all that will undoubtedly rank against the kind of security which the local authority may be regarded as offering. But against that we must keep in mind that it may be that very authority, above all others, which most urgently requires a loan on the very easiest terms on which it can be obtained. It is precisely that authority which I am afraid under existing conditions is rather badly penalised. I wish to press upon the Financial Secretary—because this is practically the only opportunity that we have annually of urging such a consideration—that he might well consider, together with the Local Loans Commissioners, to whose public work I desire to pay the highest tribute, the possibility not only of simplifying the form which the smaller local authorities have to fill up, but also of making easier the conditions on which the loan is obtained. That might be done in the first place.
Then, in the second place, we must, if we are going to encourage local recovery based on the local authority, face a new view of their security. I do not think it is sufficient to look at their high rate, indebtedness, and things like that. After all, we are not dealing with a private concern which is likely to go bankrupt. We are dealing with a local authority which has very substantial resources, which, in an emergency, could possibly take exceptional steps, and which, in any case, requires money at the lowest possible rate. Why should not the smaller local authorities, in the midst of conditions which may be far more difficult than in the cities, be able to obtain money, either singly or in co-operation, on at least as good terms as are available to larger local authorities of the country? I know that to some Members that, from the point of view of finance, may seem a rather difficult proposal, but in all my inquiries in these Treasury matters I have never been able to find cut why there should not be such a scheme of combination among the smaller local authorities as would enable them together, if they cannot do it singly, to put forward the kind of Security which the Local Loans Commissioners demand. That is a very important proposal at this stage, because a large amount of new work is going to fall on the smaller local authorities, owing to recent Government legislation, and there is not the slightest doubt that the whole tendency of the Housing Bill and of other Measures is to place a larger burden on the locality and a smaller burden on the State. It therefore becomes increasingly important that we should not penalise the smaller local authorities in the matter of payment of interest, and I do trust that in connection with this Bill the right hon. Gentleman will be able to say something of importance and promise on that point.
The hon. Member for Central Edinburgh (Mr. W. Graham) has interposed a good deal of what I had intended to say. Like him, I do not feel at all certain that the small local authorities are getting their money as cheaply as they ought to do, and I am going to ask the Financial Secretary to answer one or two questions as to how this fund of the Public Works Loan Commissioners is financed, and how it is expended. First, I want to know whether on the loans that are made by the Public Works Loan Commissioners the terms of the loan and the rate of interest to be charged rest entirely with the independent Commissioners to whom he has referred, or whether the Treasury has any voice in fixing those terms. Further I want to know whether under the Act under which these gentlemen work entire control has been taken out of the hands of the Treasury and left with them. Secondly, I want to know what rate of interest they get their money at and what rate they charge for it. Are they making a profit, and, if so, how much? Why should they make a profit? Thirdly, I want to know whether they publish any accounts and, if so, where those accounts can be seen, because, although I have not made a very intense examination or search I cannot find any definite account from these gentlemen to show how their transactions are being worked.
Stopping there for a moment and dealing with the money that they lend, may I point out it is of great importance to the small local authorities that they should get their money at the cheapest rate? Anyone who represents a rural constituency feels at every turn the importance of this proposition. I am also interested in another matter, because the other day the House passed the Agricultural Credits Bill. So far as I understand it, I cannot get to the bottom of it, it is apparently to be left to these independent gentlemen to fix the terms on which a loan is to be advanced, and I want to ask the right hon. Gentleman if that is really so.
I think the Financial Secretary to the Treasury might have carried the point a little bit further. One of the objects of this Bill is to feed the Public Works Loan Commissioners so that they can lend money to public authorities and also supply money for the loans that have to be made under the Agricultural Credits Bill. I want to know whether it rests with these gentlemen to decide on the terms on which loans are to be made, because if it does it may be within their power to render the decision of Parliament entirely nugatory. As I read Clause 1 of the Bill we are going to feed the Public Works Loan Commissioners with a sum of £20,000,000. It is to be done by the issue by the National Debt Commissioners, for the purposes of the Public Works Loan Commissioners, of various sums not exceeding £20,000,000. How is that money going to be raised? Is it going to be raised by the issue of Local Loan Stock? Here I want, to ask another question, if I may. A few years ago Local Loan 3 per cent. Stock was issued at about 50; in other words the country is paying in perpetuity 6 per cent. on what they have borrowed in the past for feeding the Public Works Loans Commissioners. I do not pose as a great financier, but to my mind that is a most extravagant method of finance. They have saddled the country in perpetuity with interest at the rate of 6 per cent. Is that so, or not? The real question is whether in calculating loans in the future that are to be made to local authorities or to be made under the Bill to which I have referred, the Commissioners are going to take into account, in fixing the rate of interest, what they have to pay on loans borrowed for entirely other purposes. That is a very important consideration.
At the present moment, our finance is in a state of flux owing to bad trade. Only a day or two ago the rate of interest on the Funded Loan was about £4 7s. The people who own Government stock for a long period are content with that rate of interest. I made a statement a few days ago that the Government could borrow money at the present time at 4½ per cent. I want to know whether, in the loans that are to be made, they take the present rate at which they can borrow the money as the basis of the rate of interest which they are going to charge? I also want to know how the money that is repaid to the Public Works Loan Commissioners, by way of instalment for repayment of loan, is used. Is it used for fresh loans, or is it used for the redemption of debt bearing a higher rate of interest? These questions are important in order to secure that the needs of the small local authorities and other persons who have to borrow from the Public Works Loan Commissioners shall be considered as regards the rate of interest. I hold the view very strongly that the Public Works Loan Commissioners are not given money for the purpose of making any profit out of the transactions, but are given it for the purpose of enabling improvements to be made at the lowest possible cost, and without any absolute cost to the Exchequer.
The points raised by the hon. Member for Central Edinburgh (Mr. W. Graham) were of a highly important character. I want to express a point of view based on the experience of localities in which my constituency is situated. I raised this matter in the discussions on the Housing Bill—the Bill to provide houses for the working classes. The information I have received from several localities points to the fact that, so far as they are concerned, the Housing Bill will of necessity remain a dead letter. They cannot utilise its provisions because of the restriction imposed by the Bill itself, and, again, because of the difficulty of raising money upon reasonable terms. In South Wales there are only a few large boroughs, like Swansea, Cardiff and Newport. Outside them, the areas are strictly limited, and most of them have been badly hit during recent years. Most of them are very heavily rated. A short time ago, in the Borough of Merthyr, the rates were 29s. 6d. in the £, and I believe that at the present time they are somewhere in the neighbourhood of 25s. That is due to the fact that the assessable values of property are low, and that bad trade has hit the collieries, who are assessed upon a tonnage basis. The locality, therefore, suffers in various ways. Again, they have been hit by the very large amount of unemployment, in connection with which they have had to give a large amount of relief, which, again, would raise their rates.
A borough like Merthyr, with a very serious housing question to face, with a keen desire on the part of the local authority to clear its slum areas and provide healthy surroundings for its people, is in a particularly difficult situation as compared with richer cities like Manchester. Manchester can raise money fairly easily and cheaply, and, under the Housing Bill, I think it is not unfair to assume that cities like that will actually be in pocket instead of out of pocket, because of their facilities for raising money. In the open market, it cannot be expected that local authorities with high rates, and with, the prospect of a continuance of fluctuating or bad trade, can possibly raise money within 1, 1½, or even 2 per cent. of the richer cities and localities. If it were possible to empower the Public Works Loan Commissioners to grant money at cheaper rates to these badly hit local authorities, I know it would be received with acclamation, and would enable them to go on with the work that is so extremely badly needed.
I want to make a suggestion here, at which I hinted the other day in an inter-
jection to the Minister of Agriculture, about the question of raising money. I am not a high financier, and it may be that my suggestion will be laughed at, but I suggested in my little interjection that at the present moment the Government is receiving very large sums of money through the Post Office Savings Bank, the depositors in which receive 2½ per cent., and I wondered whether it would be possible for the Public Works Loan Commissioners to receive some of this money from the Post Office Savings Bank. It is the money of the citizens themselves, the people who do not invest in ordinary industrial concerns, but who deposit their money there for security. I do not see why a certain amount of that money should not be handed to the Public Works Loan Commissioners, so that they could use the citizens' own money and lend it back to them at a low rate of interest, which would still be profitable so far as the Government themselves were concerned. The Minister of Agriculture replied that the reason for the low rate of interest in the Post Office Savings Bank was because the money was on short deposit. It may be true that the individual deposit may be short, but I think I can illustrate my point by a paraphrase of a line of Tennyson, in which he reminds us that
The individual withers, but the race is more and more.
I might say that the individual unit of deposit is short, but the aggregate deposit is long. The total sum remains at a fairly equable figure, running into some hundreds of millions—I am reminded that it is £287,000,000. That is a continuing amount; it is never depleted to the full extent. That £287,000,000 is a continuing and, I think, in the main, an increasing amount, and, therefore, although the individual unit of deposit may be short, we can say that the aggregate amount of the deposits continues in existence for lengthy periods. I see no reason why the local authorities, in their difficult situation, should not be enabled, through the Public Works Loans Board, to utilise the citizens' money at a lower rate of interest than they can obtain in the ordinary market. I do not know what there is to stop that. It may be that it is not possible for financial reasons, but I can see no logical reason. The citizens deposit money with the Government, and
receive 2½ per cent. interest. I suppose that that money passes into the control of the Bank of England, and I do not see why, when those same citizens are badly hit in their local authorities, and require money for local purposes, they should then have to borrow their own money back at double the interest which they themselves receive. It seems to me that a reform in that direction is badly needed, and I should like the Financial Secretary, when he replies, to indicate what are the difficulties in the way, and whether the suggestion I have made might receive consideration by this House or by his Department.
I wish to join with those who have already spoken in making an appeal to the right hon. Gentleman to consider favourably the suggestion that local authorities might be enabled to borrow money on more favourable terms than has been the case in the past. I wish to deal particularly with the experience of some localities in the immediate past, and I hope the right hon. Gentleman will be able to do something to relieve such cases as I am about to illustrate. As a member of a local authority, I know the difficulties which those authorities have in connection with money matters, and I should like to give one or two illustrations to show what local ratepayers are called upon to bear at this moment. In the Kirkcaldy district of Fife, they embarked upon a water scheme in 1913. It was begun, and had advanced to a considerable extent before the War broke out, but during the War it was stopped. They had borrowed over £100,000 for the construction of a reservoir and other services in 1913, and that money, I believe, was got at 3½ per cent. During the War the work was stopped, and, when the local authority wished to resume the construction of the reservoir, they discovered, when they came to the Public Works Loan Commissioners, that there was no chance of getting money at 3½ per cent. They were compelled to borrow from the Public Works Loan Commissioners a sum of £150,000, on which they have to pay 6½ per cent. for a period of 30 years, and they have also had to borrow an additional £50,000 at 6 per cent.
Here, therefore, is a sum of £200,000, on which that local authority has to pay 6 and 6½ per cent. for the next 30 years. What is the effect of that on the local ratepayers? It has been that during last year there was a water rate of 6s. 7d. in the £ for water alone, and during the current year that water rate is still 6s. 4d. in the £. The reduction in the rate is not due to any concession which has been made by the Public Works Loan Board. That local authority was compelled to go on with its water scheme, and wished to go on with it even during the War, but, as the House knows, it was impossible to go on with work of that description while the War was in progress. That scheme was held up during the whole period of the War at a time when it might have been possible to construct the work at a very much lower cost than ultimately was the case. The local authority in the district of Dunfermline was also compelled to embark upon a water scheme due to the construction of a naval base at Rosyth, which made a very large demand on the resources of the local authorities for water. They commenced the work, I think, in 1914. It was continued during the whole period of the War and is not yet finished. It has cost vastly more than it was estimated to cost at the beginning owing entirely to War causes, the shortage of labour, the cost of materials and especially the high rate of interest which has been demanded by the Public Works Loan Commissioners.
May I refer to another local authority which has a grievance. The Financial Secretary to the Treasury has promised that he will go into the whole matter and favourably consider the case. The Corporation of Dunfermline undertook very expensive services in connection with the development of Rosyth at a time when the cost of labour and materials was at the very highest point. Unless it gets relief from the House it is going to be saddled with enormous expense to the local ratepayers for years to come. These three illustrations I have given are merely indicative of what has been going on all over the country. Local authorities were compelled to go into certain schemes, not because they wished in many cases, but in order to provide work for the men who were being disbanded from the Army. They were compelled to go into the scheme and to go to the Public Works Loan Commissioners hoping to get money on much more favourable terms than they ultimately got. I hope this will be carefully and sympathetically considered by the Secretary to the Treasury because there is no problem in connection with local government which is giving town and county councils more concern than the enormous amount of ratepayers' money which requires to be paid in interest on money which has been borrowed during the last eight or nine years for work which has been carried out in their localities. It would be a great relief, not only to local administrators, but to the ratepayers in particular, if the right hon. Gentleman would sympathetically consider the appeals which have been made from both sides of the House in connection with this question of a lower rate of interest on the money which has been borrowed for the various schemes.
I am not a financier, but I should like to warmly endorse much that has been said by the hon. Member who has just sat down, and to make this inquiry from the right hon. Gentleman why the Government should not authorise municipalities to have their own banks under the same authority as has been given to the City of Birmingham? I think the Minister of Health could give us some information. The citizens of Birmingham deposit their money in their own bank, and a little while ago—I do not know what the rate is now—they had three per cent. The money is, very largely, handed over to the Corporation of Birmingham at four per cent., so that the citizens are able to borrow their money from themselves at a lower rate than they get in the open market. It saves all the expense of issuing loans, and they get their money at a rate that is reasonable and fair. I cannot understand why the special facilities which Birmingham has been able to secure for itself from Parliament should not, by a general Bill passed under the responsibility of the Government, be accorded to other municipalities. It is obvious that the facilities that benefit Birmingham would benefit other localities if they had the same privilege. I should like some assurance from the right hon. Gentleman that he is seriously considering the desirability of bringing in the necessary authority so that all areas in the country can have those advantages. That certainly meets many of the objections which have been raised above the Gangway.
I should like to draw the right hon. Gentleman's attention to what is taking place in Glasgow and the adjacent boroughs of Rutherglen and Dumbarton. This Bill, when you read it first, looks as if it was an instrument to be used for the benefit of local authorities. Apparently a number of people are so interested in local affairs that they are placing an instrument in the hands of the public by law which is going to enable them to do something they could not do before. But the whole function of the Bill is another method of protecting the moneylender and the usurer. In Glasgow and in Rutherglen—
When Rutherglen went out to get loans the immediate need of houses placed the community in the hands of the ordinary blood-sucking moneylender at 6½ per cent. If the Bill had been intended to do a service to local bodies it would have been something to protect the citizens in places like those I have mentioned from the blood-sucking tentacles of the investor, because interest is the greatest bugbear It is the one thing that stands between the country and continued prosperity. Here we have cases where we have built houses for the people in Scotland where after 60 years' interest has been paid and we have bought the house one-and-a-half times and we are still left with the principal to pay. There is no principle, indeed, but mere blood-sucking. I make no apology for using the term. I hoped when a Bill like this came along men occupying responsible public positions would have indicated that they, at least, were going to stand between the public, who have no protection but this House, and this system of sucking the lifeblood out of the community. All these townships are paying interest for money that ought to be made available every year for local improvements—children's playgrounds, the building of new halls, recreation grounds and better water supply. When you come to try to make a new lung, a breathing space, inside one of these little towns it places a community in the hands of the financiers, and just as it goes into the filthy clutches of these financiers, so it draws the lifeblood out of the Community in the form of interest. I can give no hope to the people of Scotland or anywhere that they are to receive any protection at all from the Bill. No encouragement or help is given to growing communities to build up and to arrange for cities for health purposes, for these places will become cities in the future. Instead of doing that, you are mulcting them, by this system, in millions of debt, which even after 60 years they will not have cleared off. Under this system you place them in the hands of the money lenders.
I do not think the House will want me to go into the question raised by the hon. Member who has just sat down. I am sure he is sincere in what he has said; but if the town of Rutherglen, or any other town in his constituency, wanted to raise money for the purposes of a park or for the institution of schools and offered a loan to the people of Rutherglen at 2 per cent., while I was offering a loan of 5 per cent., I wonder which loan the people of Rutherglen would choose in which to invest their money. After all, human nature is human nature, and if the hon. Member or any of his friends had saved a bit of money and they wanted to invest it they would look at two things, interest and security.
What is human nature? If a man went along the bank of a river and he saw another man struggling in the water and he dived in to save him, without thinking about it, that would be human nature. He would dive in to save the man.
A person invests money for the purpose of security and for the purpose of interest. The hon. Member has a good deal of influence in his own constituency, and I would suggest to him that he should ask the local authority to issue a loan of 2 per cent,. and see what will happen.
Several serious questions have been put to me, and I will attempt to answer them. The hon. Member for Central Edinburgh (Mr. W. Graham), who always interests the House when he deals with financial questions, raised the point that the large municipalities can borrow on their own terms, and on far better terms than those on which we lend to the small municipalities. We do not ask anybody to borrow from us. There is no compulsion on anybody to borrow from us. This is an arrangement made in the interests of the smaller localities, who cannot borrow in any other way. Glasgow, Edinburgh, Manchester and London can go into the money market and borrow on their own terms. These great municipalities do not go to the blood-sucking financiers, but they issue loans in their own neighbourhood which are taken up by their own citizens, who are proud to take a share. They get the money quite easily in that way, and on very favourable terms.
This Bill is for the purpose of providing means of borrowing for the small localities who cannot go into the market, and who cannot very well issue a loan in their own neighbourhood because the expense is too great. We do not deal with the big municipalities. The Local Loan Commissioners act under the direction of Parliament, and their orders are to lend the money, as I said when I was dealing with the Agricultural Credits Bill the other day, as cheaply as it can be lent, without loss to the Exchequer. Loss to the Exchequer means loss to the individual taxpayer. If the Local Loans Commissioners lent £100,000 to Rutherglen or Merthyr Tydfil at a lower rate of interest than they had to pay for it themselves it would mean, in effect, a subsidy to that particular town. All that the Local Loans Commissioners have to see is that they lend the money at exactly the cost to themselves, plus a very small amount for the expense of borrowing the money, keeping the accounts, and so forth. In the last few years there was great difficulty owing to the price of money, and a good number of municipalities and others came to the Local Loans Commissioners at the time when money was very dear in 1920. I do not agree with the hon. Member for Dun- fermline (Mr. W. Watson) that we had any hand in putting up the price. That was brought about because everybody had to borrow at that time, and it forced up the price.
The way in which the money is obtained is that local loan stock is sold either on the market or to the National Debt Commissioners at the price of the day. In 1920, when money was expensive, we could not sell local loan stock of 3 per cent. at a higher price than 50. People would not buy it. They preferred to buy something else. That meant that people who borrowed money in 1920 had to pay 6 per cent., plus a half per cent. for management, which accounts for the 6½ per cent. which has been referred to in several speeches. To-day they are borrowing at a lower rate, or, at any rate, they were before the change in the bank rate yesterday. We are able to issue local loan stock, including the cost of the expense of it, at somewhere about 4¾ per cent. If the country continues to prosper, and if the price of money goes down and we continue to pay off our debts, I hope sincerely that we shall be able to lend money as the years go on at a much less rate.
The question of the Post Office Savings Banks has been shot at me on more than one occasion during the proceedings on the Finance Bill, and I do not think it would be out of order to deal with that point now. We were told by one hon. Member opposite that the investor in the Post Office only gets 2½ per cent. interest, and then the Post Office Savings Bank Department lends the money to the Local Loan Commissioners at 4½ per cent., or even higher. We must not forget that the Government guarantees the return of all money invested in the Post Office Savings Bank. A man who puts his money in a savings bank which is not guaranteed by the Government takes a risk, because if the trustees of that savings bank invested his money in Consols at the old high rate, and Consols have gone to pieces, he is unable to get his money back in full. A man who puts money into the Post Office Savings Bank knows that as long as Great Britain lasts he can go to the Post. Office and get his money back.
The money was piling up in the Post Office Savings Bank all during the end of the last century. It was invested in Consols. Nobody expected a European war. The hon. Member for Central Edinburgh knows that Consols were the premier security. I remember, unfortunately, myself buying them at 112. They have gone down and down, but the security of the Post Office depositor remains unaffected. He is going to get his money back, though it is not really represented by the capital. To-day it is true that the Post Office, while only paying 2½ per cent., is able to lend the money at 4½ and even higher. The National Debt Commissioners drive a very hard bargain with the Exchequer for the Post Office money. The difference between the amount which they receive on the new money in interest and the 2½ per cent. which they are paying to the depositor in the Post Office Savings Bank is going to pay off the capital account. I hope in the course of a few years—I do not know that I really do hope it, because I want to see the price of money go down—that, if the price of money remains high, all the new money in the Post Office Savings Bank will be earning 4½ per cent. or a little more, and the difference between that and the interest paid the depositor will be going to replace the loss on the old transactions in Consols. When those amounts are paid off, then will be the time for the hon. Member for Springburn (Mr. Hardie), or anybody else, to ask that the rate paid to the depositor should be increased.
I am not suggesting that the depositor should receive more. What I am suggesting is that the deposits might be used for public purposes, at less than the rate which is obtained in the open market.
Does not the hon. Member see that each Government Department has to make the best bargain it can? The custodians of the Post Office money are bound in honour to the Post Office depositor to get the most interest they can for the money. It would not be fair to the people who lent the money at the low rate for the Post Office to lend it to the municipalities at the low rate, because the hon. Member knows that a few years ago the Post Office deposits were at 3½ per cent., and it might be hoped if the high rate of money lasts long enough that it will accrue to the Post Office depositor.
I think that I have made the matter clear. If the hon. Member will do me the favour of reading the OFFICIAL REPORT to-morrow, with the real intention of seeing whether I have made the matter clear, I think he will find that I have done so. The hon. Member for East Grinstead (Mr. Cautley) wanted to know whether the Local Loans Commissioners or the Treasury fixed the rate of interest. The Treasury has the last word in fixing the rate of interest. It depends, as I have explained, on the cost of raising the money plus a small amount for the administration of this fund. Then the hon. Member asked where he could get the accounts. The annual accounts deal with the whole of the transactions of the Local Loans Commissioners' Department, and the last accounts were issued two days ago. As to the money saved by the sale of stock, those who like to go into the market to-day, as a great many people do, and invest money in Local Loan Stock, get a return of 4½ per cent., but they do so, roughly, on the same terms as that at which we are able to sell our stock.
My hon. Friend also asked me how the money is going to be raised for the purposes of the Agricultural Credits Bill—whether it will be by the issue of local loan stock. Yes, it will be. He asked whether the local loan stock, under the Agricultural Credits Bill, is going to be raised at 50, but the credit of the country is better now than it was three years ago, and the stock can be sold now at either 57 or 58. In a few years' time, when money goes to a higher price, we can sell our stock on better terms, and car give agricultural credit and credits to housing authorities, or anybody who wants to borrow money from us. There is no fixed rate of interest. It depends from time to time on the cost of money. The hon. Member for Dunfermline complained—I think that I have almost answered his point—of the difference in the rates which Dunfermline has to pay now and what it had to pay previously. Before the War it borrowed £100,000 at 3½ per cent. Since the War it borrowed £150,000 at 6½ per cent. for 30 years, and it has to pay into a sinking fund. He did not mention that the sinking fund is credited also on the other side at the rate of 6½ per cent. with the money which is paid into it, so that the people of Dunfermline get the benefit on one side of the high rate which they have to pay on the other.
My hon. and gallant Friend the Member for Shrewsbury (Viscount Sandon) referred to a proposal that the Public Works Loan Commissioners should make things easier for the public utility authorities by reducing the rate of interest. That is a proposition which, judging by the applause which greeted it, seemed to appeal to a good many Members of the House. The explanation why that would be wrong is this. I have explained how that money comes to be borrowed. When public utility companies in the year 1910 came to build under these housing schemes they had to pay for the money at the current market rate. If we were to lend the money to the public utility companies in Staffordshire to build houses at a less rate than we have to pay for it at the time we borrow it, we should be charging the taxpayers in Scotland and other places in order to lend money at a cheaper rate to public utility companies in Staffordshire.
The Treasury cannot make up any loss to anybody. The Treasury has no power—to use the word of an hon. Member—to juggle with the money of the country. It can only act in accordance with the decision of the House of Commons. We have no right or power to grant payments to anybody. We can do it when the House of Commons decides that there is a case for helping some particular locality. We can do it under the instructions of the House of Commons. In connection with the Housing Bill which has just passed through this House I had not the privilege of being on the Committee, but I understand that certain proposals were made to ease the position of housing authorities who had borrowed at a high rate of interest, and those suggestions have been passed by the Committee upstairs, and no doubt will be passed by this House. There is no power to make any alteration in these matters. The House of Commons came to the conclusion, I think rightly, that power should not be given to the Treasury or the Loan Commissioners to make any exception in regard to the cost of money for these loans. We have a statutory duty placed upon us by Parliament, in dealing with all these questions of finance, to sell our money exactly as anybody else sells boots or clothes, at the market price of the day. It would be unfair for us to sell money to Staffordshire at a cheaper rate than to Merthyr Tydvil, just as it would be unfair for us to sell a house or boots at a cheaper rate in one particular district than in another.
Yes. Money is bought and sold in exactly the same way as any other commodity. We have to buy it and to sell it at the same price, plus a small amount for expenses, for keeping the accounts, and so forth. I am sorry that I cannot see any possibility, so far as the Treasury is concerned, of breaking away from what I regard as one of the soundest principles in finance. If we were once to do that, because someone had made a bad bargain and had asked to be let off at a cheaper rate, we should have every kind of pressure put upon Members of this House. Heaven knows that our life is not an easy one because of pressure now put upon us by our constituents! If hon. Members knew that their constituents could come to them and say, "Press the Treasury for one-half per cent. off here and one per cent. off there," what a life they would have, and what a life the Secretary of the Treasury would have, too!
I have not raised a point of order, but I do not think that municipal banks come within the provisions of this Bill. That subject raises a very large question If the hon. Member likes to bring in a Bill dealing with it, the Treasury will give it careful consideration.
Would the right hon. Gentleman say something as to the accumulation in the Local Loans Fund of War Savings Certificates? I believe that the amount is over £30,000,000. Would not that help us to grant a little easier conditions, at all events, for a period?
There, again, we have to borrow money, and we have to pay interest. The arrangement was that we were to lend to the local authorities, on security, up to one-half of the local certificates bought in their own division. That was a proposal for popularising the certificates. It has recently been considered by a Committee, which came to the conclusion that the principle was not sound, and should be stopped. But that in no way affects the position of the local authorities. We are prepared still to make loans to the local authorities. A local authority comes to us and says, "Our people are still investing largely in certificates. There has been £10,000 invested in the past year. Will you lend us up to £5,000?" and, subject to the security being sound, we are prepared to do it.