asked the Chancellor of the exchequer what are the grounds for the Treasury ban on municipal conversions; and whether, in view of the desirability of conserving the local as well as the national resources by reducing the rates of interest, he will have this ban removed?

asked the Chancellor of the exchequer why he sent out a circular to the local authorities preventing them from converting any of their outstanding loans at a reduced rate of interest?

It is essential that, pending the issue of a war loan, calls on the capital market should be restricted to specially urgent needs. I regret that this should involve a temporary postponement of possible conversions by local authorities involving cash borrowing; but I am sure that they will recognise that, for a time, the Government's financial requirements for the prosecution of the war must come first.

While agreeing with the point made by the Chancellor of the exchequer, is it not true that a reduction in these rates of interest would be all part of one process, and would not neces- sarily involve any call on the capital market as the right hon. suggests?

That is a thing nobody can say. If a local authority is going to convert its loan, and if there is any ban on its doing so, it is because it proposes going on the money market and announcing that it wants to borrow money. It is necessary for the moment that such borrowing should be limited. I regret if it causes any inconvenience but it is essential in the interest of a great Government loan.

Is the right hon. Gentleman not aware that he, himself, is making a conversion without any call on the capital market, and if local authorities take a similar course does that in any way affect the Government's credit?

I hope the Government conversion may simply be a conversion.

Will the Chancellor arrange that the local authorities who wish to convert shall go into the money market when the Government are not in it?

This matter is very serious. It refers to conversion and it does not require new money. Therefore, why should the Treasury oppose this conversion, which must be in the interests of the community as a whole?

I do not think my hon. Friend has followed my meaning. If a local authority has funds available, whether in a sinking fund or otherwise, and can repay the loan without that further borrowing, there is nothing in the world to prevent it doing so. It is only because the local authorities want to borrow that the difficulty arises.

The money is required to be borrowed for conversion and not for new money purposes.