Orders of the Day — Public Works Loans Bill

– in the House of Commons at 12:00 am on 12th November 1952.

Alert me about debates like this

Order for Second Reading read.

3.45 p.m.

Photo of Mr John Boyd-Carpenter Mr John Boyd-Carpenter , Kingston upon Thames

I beg to move, "That the Bill be now read a Second time."

The main purpose of the Bill is to make further provision for funds to be made available for the Public Works Loan Board to make advances to local authorities. The House will recall that a similar provision has been made in recent years. As the House will see, provision is made in Clause 1 for a total of £500 million as the maximum amount of advances which can be made during the period between the coming into force of this Measure and the coming into force of the next Measure of this character.

The provision is not an annual one, but runs from the coming into effect of one Bill to the coming into effect of the next one. The amount in Clause 1 to which I have already referred is the same as in the Act of 1951; the Act of 1951 provides also for a sum of £500 million, and it may interest the House to know that of that sum, up to the beginning of the present month, £399 million has actually been issued, leaving £101 million in hand. As the present level of advance averages about £8 million a week, it is a perfectly simple mathematical calculation to see that that total sum will at the present rate be exhausted by about the end of January.

It may also interest the House to know the breakdown and the actual direction in which the £399 million advanced up to the beginning of November has been expended. Of that sum, £274 million has gone for housing, £45½ million for education, £14½ million for public health, £4½ million for stock redemption, and the remaining £60½ million for miscellaneous purposes, which include transport, water, land drainage, etc.

Clause 2 deals with the commitments which the Public Works Loan Board will be authorised to incur, including the amounts actually advanced. This, of course, equally relates to the period between the coming into force of this Bill and the coming into force of any subsequent one. The corresponding figure in the 1951 Act was £950 million. The figure in Clause 2 of the present Bill is £1,050 million. In this connection I ought to tell the House that of the £950 million authorised by Section 2 of the 1951 Act, £904 million had been expended—the commitments, that is to say, had been made—at the beginning of November, leaving only £46 million in hand. New commitments are at the moment running at an average of £12 million per week, and the level under the present Bill looks like being exhausted about the end of the present month.

Photo of Mr William Hall Mr William Hall , Colne Valley

The hon. Gentleman said "Bill" when he meant "Act."

Photo of Mr John Boyd-Carpenter Mr John Boyd-Carpenter , Kingston upon Thames

I am very much obliged to the right hon. Gentleman. It is under the present Act, and there is also a present Bill before the House, and I must not mislead the right hon. Gentleman as to which it is.

The £904 million of the £950 million under the present Act has been expended, and at the average rate of £12 million per week at which those commitments are now running, the amount looks like being exhausted by about the end of the month. There is, therefore, a good deal of urgency about the progress of the Bill if the sources of local authority finance are not to be very seriously interfered with.

As I have said, these are the figures—the same as in last year's Act in Clause I, and £100 million more in Clause 2—which we have inserted in the Bill, and they may be in some degree affected by certain considerations to which I shall come later in my speech. I want first to offer a comment on the selection of a proper figure.

There are really two conflicting considerations. One is to make quite sure that the Public Works Loan Board is adequately supplied with funds for lending for approved purposes during the currency of the Bill when it becomes an Act. With the developments that are taking place, it is clear that the commitments figure, in Section 2 of last year's Act, ran things rather fine and for that reason we have provided for a higher figure by £100 million this year. On the other hand, if these figures are fixed too high, Parliament is deprived of its regular control over this matter, and that, too, we think would be wrong.

I now wish to deal rather more briefly with the other parts of the Bill, which are of much less general importance. Clauses 3, 4 and 5 deal with the different stages and aspects of the very sad process of writing off bad debts. The procedure is a trifle technical and involves two stages. It involves the writing off from the account of the assets of the Local Loans Fund, at which stage they become debts due not to the Fund but to the Exchequer; and then there is a subsequent stage of writing them off as debts due to the Exchequer.

Clause 3 applies the first process; that is to say, the writing off, as a liability of the debtor to the Fund, of a sum of £39,940 19s. 11d.—I hope the House will appreciate the precision of that figure—in circumstances which are explained fairly fully on the second page of the Bill as printed, on the back of the Financial Memorandum, and unless any point arises as to them perhaps I might be allowed to leave that explanation to speak for itself.

Clauses 4 and 5 carry on the further stage of remitting as debts due to the Exchequer both the item with which Clause 3 deals and also a number of other items all of which relate to various liabilities by various people under the Agricultural Credits Act, 1923. Each of these items has been investigated and recommended by the Public Works Loan Board as being irrecoverable. The sum involved—it has not been added up in the Bill and I thought I ought not to ask the House to make the calculation—is £130,525 11s. 2d. by way of principal and £4,183 18s. 1d. by way of interest. These have been recommended as irrecoverable, and all that we are doing is to take the procedural steps necessary in order to recognise the inevitable.

Opportunity is taken in Clause 6 to simplify the arrangements originally made in the Government of Ireland Act, 1920, in respect of loans from the Local Loans Fund which were advanced to borrowers in Northern Ireland before 22nd November, 1921. That date is selected as it was the effective date of the Government of Ireland Act, 1920.

Briefly, the substance of the present position is as follows. Repayments due on these loans are first collected by the Government of Northern Ireland, the Local Loans Fund is credited from the United Kingdom Exchequer with a similar amount, and the United Kingdom Exchequer then deducts that sum from the amount of the Northern Ireland share of the reserved taxes which are paid over to the Government of Northern Ireland.

It is a purely roundabout procedure, and Clause 6 brings that procedure, which might otherwise continue to 1995, to a once-for-all operation under which the sum outstanding, which is only some £170,000, is paid off by a once-for-all deduction from the Northern Ireland share of the reserved taxes. That has been agreed with the Government of Northern Ireland. It leaves the financial position of all the parties concerned exactly the same, but saves a certain amount of detailed administrative work which would otherwise have gone on for the next 45 years.

I ought to mention to the House a matter which, while not strictly pertinent to the Bill, is, subject to Mr. Speaker's Ruling, I submit, in order on the Second Reading of the Bill by reason of its clear relevance to the amounts which we are asking the House to accept in Clauses 1 and 2 of the Bill. The House will have noticed that the Expiring Laws Continuance Bill, which is now available to hon. Members, does not contain in its Schedule any provision for the continuance of Section 1 of the Local Authorities Loans Act, 1945, and that, as a consequence, that Section will lapse on 31st December of the present year. The general effect of that section—

Photo of Mr James Callaghan Mr James Callaghan , Cardiff South East

On a point of order, Mr. Speaker. I regret to have to interrupt the Financial Secretary, but there appears to be a point of procedure on which we should like to have your guidance. The Financial Secretary is obviously in some doubt as to whether this is in order, as he indicated. Might I draw your attention to the fact that, on the Expiring Laws Continuance Bill, one of my hon. Friends and I have put down an Amendment which will presumably be for discussion later today? I should like to know whether the fact that the matter is being discussed now violates in any way the rules about anticipation.

Photo of Mr William Morrison Mr William Morrison , Cirencester and Tewkesbury

I was waiting for the Financial Secretary to develop his argument in order to understand the relevance of the reference to the Expiring Laws Continuance Bill to what he was saying, but I can assure the hon. Member for Cardiff, South-East (Mr. Callaghan) that anything said now would not prejudice in any way the further proceedings upon the Expiring Laws Continuance Bill.

Photo of Mr James Callaghan Mr James Callaghan , Cardiff South East

May I take it, Mr. Speaker, that, in other words, if the Financial Secretary develops his case here, as he seems about to do—and I have no objection to his doing so—we shall have the opportunity of a second discussion on this matter when we get to the Expiring Laws Continuance Bill?

Photo of Mr William Morrison Mr William Morrison , Cirencester and Tewkesbury

That raises another matter, but the Second Reading of the Expiring Laws Continuance Bill has for many years been rigidly limited to the general question. A matter of detail such as the hon. Member's proposed Amendment—here I am guilty of a little anticipation, but it is necessary in order to answer the question which has been asked of me—would be out of order on Second Reading, though the Amendment might be moved in Committee; but I can undertake that anything which the Financial Secretary says now will not prejudice the proper rights of the hon. Gentleman on the other Bill.

Photo of Mr James Callaghan Mr James Callaghan , Cardiff South East

I suppose it would be a little out of order, Mr. Speaker, for me to ask you for the basis of your Ruling on a Bill which is not yet before the House, for that would indeed be anticipation. I should like, when the appropriate moment comes, to submit to you certain observations on that matter, but it is clear that it would be wrong to do so now. May I suggest that, for the convenience of the House, it would be far better that we should have a discussion on the timing of the Expiring Laws Continuance Bill, which is the matter towards which the Motion in my name is directed, when we reach that Bill, and that it would be for the better order of our business if the Financial Secretary were to make his observations at that time?

Photo of Mr William Morrison Mr William Morrison , Cirencester and Tewkesbury

I quite agree, and the only reason I made reference to the Amendment in the name of the hon. Gentleman at this stage was that I did not want, even by silence, to mislead him into any false idea of what was in my mind upon this subject. I hope the Financial Secretary will now show what relevance he attaches to this matter of the other Act.

Photo of Mr John Boyd-Carpenter Mr John Boyd-Carpenter , Kingston upon Thames

I was about to seek to do so when the hon. Gentleman opposite sought your Ruling, Mr. Speaker, but I am entirely in your hands and in the hands of the House. I am asking the House in this Bill to authorise the issue to the Public Works Loan Board of a certain sum of money—£500 million—and to authorise the commitment of £1,050 million. In my submission, it is clearly relevant to the question, aye or no, whether these figures are adequate that the House should say, aye or no, whether the Public Works Loan Board is going to be the only source from which local authorities, in substance, can borrow.

In my view, it is important that the House should realise the considerations which affect the selection of the figure. The subsequent matter of the Local Authorities Loans Act and the sum to be used is relevant to that figure. I am entirely in the hands of the House, and it is only my desire that, after deciding on this Bill, we should not have the complaint that any relevant factors had been concealed from the House. I thought it right to submit to you that, were I permitted to do so, it would have been for the convenience of the House, but I have no desire to press it if you should indicate to the contrary or if there were any objection to that course.

Photo of Mr James Callaghan Mr James Callaghan , Cardiff South East

What we seek to do is to get proper order into our business, and that is for the convenience of the whole House. What I would submit, therefore, is that it would be far better if this debate were to be adjourned now, and we proceeded to a discussion of the Expiring Laws Continuance Bill, in order that we may decide, as the House, whether or not we shall now give a Second Reading to that Bill and whether it should or not include in the future that particular Section of the Local Authorities Loans Act, 1945, which the Financial Secretary tells us he is not going to include.

If I may say so, it is really not in the hands of the Financial Secretary to decide whether it is to be included or not. It is for the House to decide, and we are in the difficulty in which the Government have placed us by arranging the business in this way. We are not able at this stage to say whether the Expiring Laws Continuance Bill will contain that Section of the Local Authorities Loans Act or not, but the Financial Secretary is asking us to give a Second Reading to this Measure now before us on the assumption that the House is going to take another decision later on.

That seems to me to put the business entirely the wrong way round, and I think the Financial Secretary might well consider whether he should not now have the debate adjourned, so that we could proceed to order our business in the contrary way.

Photo of Mr William Morrison Mr William Morrison , Cirencester and Tewkesbury

I do not know whether what I may say can clear up the matter, but I am now possessed of the Act to which reference has been made, and it appears to me that the Section in question does prohibit the borrowing otherwise than through the Public Works Loan Commissioners. The Financial Secretary is quite at liberty, in his Motion for the Second Reading of the Bill now before the House, to state that it is the Government's intention to remove, or to allow to expire, that prohibition. That is a factor which is relevant to the discussion, but we must deal with the other Bill when we come to it.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

Further to that point of order, Mr. Speaker. With respect, it is surely for the House, and not for the Government, to decide what is done about the second Bill. May I submit that, in the two previous years, the Expiring Laws Continuance Bill was placed on the Order Paper in advance of this Bill, and, for some reason which I do not understand, the Government have reversed the order, and that is what has placed us in this difficulty. That does lend support to my hon. Friend's suggestion that it would be more logical to reverse the order of the business.

Photo of Mr John Boyd-Carpenter Mr John Boyd-Carpenter , Kingston upon Thames

I do not know whether that is a point of order or a contribution to the debate, but if the former, it is one on which I should have some observations to make at a later stage.

Photo of Mr William Morrison Mr William Morrison , Cirencester and Tewkesbury

I cannot proceed with this matter on the basis that the business should be arranged otherwise than it is, and therefore the Bill before the House is the one of which the Financial Secretary is moving the Second Reading. It is true that it is for the House and not for the Government to decide whether the Expiring Laws Continuance Bill, in its present form, omitting reference to this Act, shall be passed, but when Ministers introduce Bills into this House it is quite in order for them to give the general background of the policy against which the Bill has been framed, and, stated in that way, it seems to me that the argument of the Financial Secretary is void of offence.

I think we must now proceed, and that what has been omitted from the Expiring Laws Continuance Bill can be dealt with when we come to that Bill. Surely it is relevant, and for the understanding of the whole House, of what is included in the Public Works Loans Bill, that the Government should make clear their intention in regard to it, and it is a matter which the House is at liberty to discuss and, on the Expiring Laws Continuance Bill, can decide for itself afresh.

Photo of Mr Reginald Paget Mr Reginald Paget , Northampton

Further to that point of order. Is there not a rule of order that we may not discuss one Bill in the light of the law as it may be, but that we have to discuss a Bill before the House in the light of the law as it is? What we are being asked to do here is to discuss, not this Bill in the light of the law as it is, but in the light of the law as it may be.

If, when we come to another Bill, this House decides to change the existing law, the great problem will be this. Here we have a volume of public investment, and a great many of us on this side of the House, and I imagine also on the other side, are really concerned as to how this fits into the public investment programme. Is this the volume of public investment which will be carried out through the local authorities, or is this going to be only part of that volume, and is there going to be a free market for public investment existing parallel with this?

The one really relevant question here is the quantum of public investment in the light of the existing law, and is it not out of order to discuss it in the light of the law as it may be? In those circumstances, although it is not for me to move it, if you, Mr. Speaker, were to consider whether perhaps there might be a Motion to adjourn this matter, then we could settle the question whether the debate should be continued before we come to the discussion of this Bill; otherwise, it seems to me that we are in a great dilemma.

Photo of Mr William Morrison Mr William Morrison , Cirencester and Tewkesbury

To deal with one point of order at a time, the hon. and learned Member for Northampton (Mr. Paget) puts to me the point whether or not it is out of order to discuss legislation in the light of the law, not as it stands, but as it may hereafter be.

I think it is quite in order, because I have myself a recollection of a series of Acts, all of which ultimately hang together, to carry out some particular matter of policy. I think the hon. and learned Gentleman must remember many occasions of Second Readings of Bills, the due execution of which in detail had to be postponed for further legislation by means of an Order in Council, or some other method, and for the understanding of the principle of the Bill the scope of that further legislation was described. I think it is relevant for the House to take into consideration what has been said by the Financial Secretary. When we come to the Expiring Laws Continuance Bill, the question will be quite unprejudiced by anything said on the present Bill, and the House can come to its decision whether or not that Bill as it now stands should be passed.

Photo of Mr Arthur Blenkinsop Mr Arthur Blenkinsop , Newcastle upon Tyne East

Many of us are in very real difficulty here. I had my name down to an Amendment, but it appears to me that if reference is to be made to the Expiring Laws Continuance Bill further discussion must take place upon it, and it will be difficult, if not impossible, to repeat on the Expiring Laws Continuance Bill the arguments that we shall have to put forward. It therefore seems highly desirable that that discussion should take place first, rather than after the present Bill.

Photo of Mr Charles Pannell Mr Charles Pannell , Leeds West

It might assist you, Mr. Speaker, in settling this point of order, if I read what the Financial Secretary said in opening the discussion last year on the Public Works Loans Bill. He said: This Bill is the successor to a similar Measure introduced into this House last year by the hon. Member for Battersea, North (Mr. Jay), and it is also the logical consequence of the renewal by this House last week in the Expiring Laws Continuance Bill of Section 1 of the Local Authorities Loans Act."—[OFFICIAL REPORT, 23rd November, 1951; Vol. 494, c. 739.] If the Financial Secretary was logical last year, why is he so illogical now? I should like to ask you whether that quotation does not establish precedent enough for the point of view being put forward from the Opposition Front Bench?

Photo of Mr John Boyd-Carpenter Mr John Boyd-Carpenter , Kingston upon Thames

If logic be a point of order, I submit that the illogicality is that of the hon. Member. Last year, Section 1 of the Local Authorities Loans Act was renewed; hence the order. This year, it is not renewed; hence the order.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

The Financial Secretary has already pointed out that the amount of loans we shall permit under the Bill before the House may be dependent upon whether or not the Local Authorities Loans Act is continued. Therefore, if the House should decide later on that that Act should not be continued, an alteration will be required in the present Bill.

Photo of Mr John Boyd-Carpenter Mr John Boyd-Carpenter , Kingston upon Thames

The right hon. Gentleman has got it the wrong way round.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

No. The hon. Gentleman has pointed out that the £1,050 million was subject to the arrangement that we shall make for other types of borrowing.

Photo of Sir Geoffrey Hutchinson Sir Geoffrey Hutchinson , Ilford North

Whatever decision the House may take on the Expiring Laws Continuance Bill, it is necessary for the Government to make provision for borrowing in the Public Works Loans Bill, because local authorities may decide not to have recourse to the market at all but to have recourse to the Commissioners. Provision must be made in the present Bill for that eventuality.

Photo of Mr William Morrison Mr William Morrison , Cirencester and Tewkesbury

A rather novel point has been raised. I appreciate that the order of introduction of Bills has apparently been changed from what it was last year, but that does not introduce any point of order for me. The best help I can give to the House is to say that the discussion which has just commenced on the Public Works Loans Bill should continue on the basis of the statement made by the Financial Secretary, and that the House must make its calculations and assess the merits and demerits of the Bill against the background which the Financial Secretary is painting for us. When we come to the Expiring Laws Continuance Bill, we can deal with this matter in more detail. It will be quite out of order to refer to the Expiring Laws Continuance Bill more than is necessary, because the matter can be discussed as I have outlined.

Photo of Mr William Hall Mr William Hall , Colne Valley

Do I understand from your Ruling that on the Second Reading of the Expiring Laws Continuance Bill we shall be able to roam as widely as I gather from your last statement we might be allowed to do? If that is not so and we cannot deal with the matter until we reach the Committee stage, and if we are also hampered to a certain extent now in discussing the Local Authorities Loans Act, 1945, we on this side of the House will have the worst of both worlds, and the House will not be able to discuss the matter in its entirety and thus get the best out of the debate.

This goes to the core of the Bill. On the words used by the Financial Secretary to the Treasury, the Bill would have been for a greater amount if the Government had not had it in mind to drop Section 1 of the 1945 Act. I know that a Public Works Loans Bill can be introduced at any time and that we need not wait for another year, but it seems a waste of time to agree to a Bill with the present amount stated in it and later, if the House refuses to delete Section 1 of the 1945 Act, to have to come back—on the Financial Secretary's own showing—and agree to a much larger amount for advances by the Public Works Loan Board.

Photo of Mr William Morrison Mr William Morrison , Cirencester and Tewkesbury

That may be so, but there will be no difficulty in dealing with these matters seriatim and in proper order. The Bill can be discussed on the basis that has been declared, and when we come to the other Bill we can deal with the matter of omitting the Act at the proper stage of the Bill. I see nothing to prevent adequate discussion of that matter. It is a little difficult, but I hope that the House will now continue with the Bill.

Photo of Mr James Callaghan Mr James Callaghan , Cardiff South East

In order to try to regularise our proceedings, I should like to submit a Motion for consideration by you. It has become increasingly clear to the House that, for reasons we do not understand, the Government have arranged the business in a way which makes it most difficult for us to consider it properly.

Photo of Mr William Morrison Mr William Morrison , Cirencester and Tewkesbury

Is the hon. Gentleman going to move the Adjournment of the debate? He has not said so yet, but I must point out that he cannot do that in the middle of a speech. That can be done only between speeches. The Financial Secretary had possession of the Floor of the House.

Photo of Mr James Callaghan Mr James Callaghan , Cardiff South East

Is the Financial Secretary to be allowed to discuss this issue now although, at a later stage, the House may decide to adjourn the debate in order to discuss the business in the reverse order? Surely that cannot be in the interests of the House.

Photo of Mr William Morrison Mr William Morrison , Cirencester and Tewkesbury

The Adjournment cannot be moved in the middle of a speech. The fact is that the Financial Secretary had the Floor and was addressing the House, and he should continue to address it.

Photo of Mr John Boyd-Carpenter Mr John Boyd-Carpenter , Kingston upon Thames

The very interesting discussion on the fundamental question as to which came first, the chicken or the egg, really gives rise to no real difficulty. I thought it right, and I still think it right, to let the House be in full possession of the intentions of the Government with regard to the other matter to which we have referred. Indeed, had I not done so, the indignation which would, in my view quite justifiably, have been expressed from the benches opposite would have been very considerable.

I was making it clear at this stage that, by reason of the matters to which I have referred and which you have ruled I was in order in referring to, the position will be, as from 31st December, if the House accepts the view which the Government will put forward, that Section 1 of the Local Authorities Loans Act, 1945, will lapse and the prohibition which it embodies on borrowing other than from the Public Works Loan Commissioners, with certain minor exceptions, will also lapse. As I have suggested to the House, that is clearly relevant to the figures with which we are concerned in this Bill. It is for that reason that that Act is considerable degree material.

The local authority associations are being informed of the position and have been told that we shall be glad to discuss with them any point they wish to raise. However, I want to add that capital expenditure by local authorities will inevitably continue on a large scale. Most of the loans raised by local authorities are required to finance the housing programme, past and present, which they have undertaken with full authority from successive Governments.

Photo of Mr John Boyd-Carpenter Mr John Boyd-Carpenter , Kingston upon Thames

The hon. and gallant Member will forgive me if I do not give way, but my argument has already been so interrupted that it is essential on a not unimportant matter for it to be as clear as possible. I know he will understand.

It is clear that the authorities must continue to be given access to the sources of finance for meeting approved commitments, but the effect of this is that we propose to expand the methods by which the authorities raise their money. Since 1945 the Local Loans Fund supplied by the Exchequer has been the sole source of new money, apart from a small amount of borrowing from internal funds and by private mortgage. The time has now come, in the view of the Government, to add the stock market to the sources available to the authorities.

This does not mean that the Local Loans Fund will cease to lend. On the contrary, it will continue to provide for the requirements of the majority of the 1,500 authorities responsible for the housing programme. Indeed, that is the purpose of this Bill. But some of the largest authorities will be asked to assist the Government in financing their programme by issuing their own stocks. This development will enable the Government to release the authorities from the statutory obligation referred to.

Photo of Mr James Ede Mr James Ede , South Shields

Does that mean that the hon. Gentleman is suggesting that certain local authorities coming to the Public Works Loan Board will be told that there is no money for them and they must go on to the market?

Photo of Mr William Hall Mr William Hall , Colne Valley

Before the hon. Gentleman answers that—

Photo of Mr John Boyd-Carpenter Mr John Boyd-Carpenter , Kingston upon Thames

I am sorry but I cannot reply to more than one right hon. Gentleman at a time. It does not mean what the right hon. Gentleman suggests. I am making a carefully considered statement and I hope that, by the time I have completed it, I shall have quietened any doubts which the right hon. Gentleman may have.

Photo of Mr William Hall Mr William Hall , Colne Valley

I am much obliged to the hon. Gentleman for giving way to me. If the hon. Gentleman is going to make in a few minutes the point I am raising now, I apologise in advance, but are we to be told whether or not there is to be laid down as in pre-war days a rateable value, which I think was £200,000 in England and Wales and £250,000 in Scotland?

Photo of Mr John Boyd-Carpenter Mr John Boyd-Carpenter , Kingston upon Thames

If my recollection serves, it is substantially the same as that of the right hon. Gentleman, namely, that before the war there was a limit. Local authorities below a certain size went to the Board and those above it had not the right to go to the Board. No such proposal is included here.

Photo of Sir Eric Fletcher Sir Eric Fletcher , Islington East

May I refer to a real point with which the Financial Secretary has not dealt? The hon. Gentleman said just now that, notwithstanding the cessation of Section 1 of the 1945 Act, the Public Works Loan Board will continue to lend to local authorities. Does he mean that the Board will be obliged to lend, as in the past, or that there will be discretion whether it does or not?

Photo of Mr John Boyd-Carpenter Mr John Boyd-Carpenter , Kingston upon Thames

The general system under which the Board will operate—I know the hon. Gentleman has great experience of it—will be precisely as before. I think that the decision to exploit all the sources from which the local authorities can borrow, including the stock market, will be generally accepted as a step in the right direction, but I must warn the House not to magnify the importance of this development. It must not be thought that we intend to exclude a number of authorities from the Fund and force them on to the stock market. That is my answer to the right hon. Gentleman the Member for South Shields (Mr. Ede).

The local authorities have a big programme of commitments authorised by this Government and by the previous Government. While they are in this situation, it is clear that they must be given access to all the sources of finance, including the Local Loans Fund as now. That is my answer to the hon. Member for Islington, East (Mr. E. Fletcher). We are simply adding the stock market to the sources of finance that will be available to them, but we have to see the extent to which such issues will be practicable and—this is the key to the whole thing—we intend to proceed in agreement with the authorities concerned, and we shall have regard to the capacity of the market to accommodate local authority borrowing on reasonable terms.

Photo of Mr John Boyd-Carpenter Mr John Boyd-Carpenter , Kingston upon Thames

On reasonable terms. All these are matters which, as we have already indicated to the local authority associations, we shall be glad to discuss with them and clear the details with them of any point which disquiets them.

Photo of Mr Marcus Lipton Mr Marcus Lipton , Lambeth Brixton

There have not yet been discussions?

Photo of Mr John Boyd-Carpenter Mr John Boyd-Carpenter , Kingston upon Thames

The local authority associations are being given a statement of the intentions of the Government and an indication that any point which arises on those intentions we shall be happy to discuss with them.

Photo of Mr James Callaghan Mr James Callaghan , Cardiff South East

Will the hon. Gentleman make quite clear what he is doing? Is he saying that he has given this to the local authorities or do the words "being given" mean that they are going to have it in the future? In other words, is he asking us to give a Second Reading to the Bill in advance of the Expiring Laws Continuance Bill without full knowledge as to whether the local authorities are in agreement with the detailed steps he is going to take?

Photo of Mr John Boyd-Carpenter Mr John Boyd-Carpenter , Kingston upon Thames

I think the hon. Gentleman completely fails to comprehend the position. All we shall be doing by not continuing Section 1 of the Local Authorities Loans Act is to remove a statutory prohibition, no more.

Photo of Mr John Boyd-Carpenter Mr John Boyd-Carpenter , Kingston upon Thames

It is not so. Before the hon. Gentleman intervenes, he must read the section. What we are doing is to remove a statutory prohibition upon local authorities going to the market, no more.

Photo of Mr Marcus Lipton Mr Marcus Lipton , Lambeth Brixton

Without consulting the local authorities beforehand.

Photo of Mr John Boyd-Carpenter Mr John Boyd-Carpenter , Kingston upon Thames

The matter which is being discussed with them is how they shall use that new freedom. I think the hon. Gentleman is being quite unreasonable. He does not require discussions with somebody before a statutory prohibition is removed from him.

Photo of Mr John Boyd-Carpenter Mr John Boyd-Carpenter , Kingston upon Thames

I am not giving way any more. The only step which we are taking is to remove a statutory prohibition. We have gone out of our way to offer to discuss with them the way to use this new freedom which, as hon. Members are aware, from time to time both the authorities and hon. Members have gone out of their way to ask for.

Given these limitations, as I have said, it would be wrong to expect any great volume of borrowing from the Stock Exchange. Under present conditions it is inevitable that the Local Loans Fund should continue to be the main reservoir of new capital for the local authorities. This fact is recognised by the provision for the coming year in this Bill which, as I have already explained to the House, exceeds the provision made in Section 2 of last year's Act.

For the majority of the authorities, therefore, the change will leave their normal sources of capital wholly unchanged, namely, the Local Loans Fund and the private mortgage market, but they will have the additional facility available if they so desire. Under present conditions, the Local Loans Fund remains the main reservoir. That being so, it is essential to provide the funds for the Public Works Loan Board. Though the funds for the actual lending will run until the end of January, the capacity to incur new commitments will be exhausted by about the end of this month.

In these circumstances I am sure that the House, and in particular those hon. Members who have shown their concern for funds being made available to the local authorities, will appreciate the urgency of this Bill becoming law as early as possible. It would not be the wish of any hon. Member that the activities of local authorities should be held up as the result of a lapsing of the authority of the Public Works Loan Board. In those circumstances, I can ask the House to give the Bill, after due consideration, its Second Reading in order that there shall be no interruption in the flow of funds from which the local authorities can, and will, continue to borrow.

4.31 p.m.

Photo of Mr James Callaghan Mr James Callaghan , Cardiff South East

I beg to move, "That the debate be now adjourned."

I move this Motion for reasons that, I think, became clear to the House before you yourself went into the Chair, Mr. Deputy-Speaker, but which I will repeat. In our view—I am very glad to see the Leader of the House present—the Government have added to the difficulties of the proper consideration of these Measures that are on the Order Paper today by rearranging them differently from the usual order. What we are discussing now, and what the Financial Secretary has moved, is the Second Reading of the Public Works Loans Bill, which provides for a sum of money to be set aside for the use of local authorities during the next 12 months.

The hon. Gentleman is asking us to give a Second Reading to that Bill and, as you will notice, Mr. Deputy-Speaker, to pass the Money Resolution, which is concerned with the Bill, and which will presumably come on next, in advance of a discussion on the Expiring Laws Continuance Bill, on which my hon. Friend the Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop) and I put down an Amendment for the renewal of Section 1 of the Local Authorities Loans Act.

I am sorry that we have not been able to get the Financial Secretary to appreciate that the total amount of money that will have to be set aside under the Money Resolution, to which we are going to give our assent, depends upon whether the Motion which stands in my name and that of my hon. Friend is accepted by the House.

It was on the grounds of anticipation, because I saw this difficulty, that I asked Mr. Speaker earlier this afternoon whether he would give a Ruling on the point whether it was in order for the Financial Secretary to refer in his speech to the renewal of the Local Authorities Loans Act. Mr. Speaker gave that Ruling and, of course, the Financial Secretary accepted it and abided by it, and he made a speech which seemed to have much more to do with the Local Authorities Loans Act than with the Public Works Loans Bill. Two-thirds of his speech was devoted to an explanation of the way in which local authorities will be able to have recourse to the market for loans.

That is a matter on which I should have something to say at a later stage, because there are very far-reaching consequences attached to this from the point of view of local authorities, of the capital investment programme, and of the Government's control over borrowing, none of which the Financial Secretary seems to understand. The whole of his speech was directed to the fact that this is a simple matter of freeing the local authorities from a statutory restriction which has been placed upon them, that they will obviously be grateful for this freedom, and that there is really no more to discuss.

The Financial Secretary should read the speech that was made in introducing the Local Authorities Loans Bill by Sir John Anderson in January. 1945, if he believes that the matter is as simple as this. Sir John Anderson, when moving the Second Reading on that occasion, made it quite clear that the Measure that he was proposing to ask the House to pass had the most important consequences upon the whole of the access to the capital market, upon borrowing powers of local authorities, and upon the capital investment programme and the country's orderly post-war development. It is a little trivial of the Financial Secretary to come to the House and say that we are merely giving to local authorities a freedom that they will be delighted to have. In fact, the matter goes to the whole root of the Government's economic and financial programme, and the hon. Gentleman has not realised it.

I add as another reason for adjourning the debate that, apparently, the conditions under which this freedom, if I may so call it, is to be given have apparently not been agreed with the local authorities. I am not even clear, because the hon. Gentleman did not give me a clear answer, whether it has yet been communicated to the local authorities. I will gladly give way to the hon. Gentleman to clear up the point. Have the conditions under which local authorities will have access to the market been agreed with them?

Photo of Mr John Boyd-Carpenter Mr John Boyd-Carpenter , Kingston upon Thames

I have already told the hon. Gentleman, but I gladly do so again if he so desires, that an indication of the Government's intention in this matter has been sent to the local authority associations—

Photo of Mr John Boyd-Carpenter Mr John Boyd-Carpenter , Kingston upon Thames

—and that an intimation has been given to them that if they or individual authorities desire to discuss any points arising from it, we shall be very glad so to do.

Photo of Mr James Callaghan Mr James Callaghan , Cardiff South East

I am obliged to the hon. Gentleman for telling us that. It is quite clear, therefore, that we do not know yet what are the reactions of the local authorities to this matter. We do not know, despite the interjection of the hon. and learned Member for Ilford, North (Sir G. Hutchinson) whether local authorities agree with this. We do not know whether the conditions will be satisfactory to them, or, indeed, to the House, which is equally important.

I submit that, in accordance with precedent, the Expiring Laws Continuance Bill should be considered first. That is a fairly well known precedent in the House. In consideration of the fact that local authorities have apparently not yet agreed these arrangements with the Government as to the conditions upon which they are to be given access to the capital market, and the fact that the Money Resolution, which we are to be asked to pass at this stage, must clearly be contingent upon whether the local authorities have access to the money market or not, I submit, Mr. Deputy-Speaker, that the Government and the Leader of the House should accept the Motion that the debate be now adjourned, in order that we may get on the Expiring Laws Continuance Bill, which is on the Order Paper today and which can be discussed today—if the House is agreeable, a decision on it can be reached today—and then we can return, in the light of our decision upon that, to a debate upon the Public Works Loans Bill, knowing where we stand in relation to these matters.

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

The hon. Member asks leave to move that the debate be adjourned. I take it his complaint is really about the order in which the Government have put their business on the Paper, but that is entirely a matter for the Government and I decline to propose the Question to the House.

Photo of Mr Herbert Morrison Mr Herbert Morrison , Lewisham South

On a point of order, Mr. Deputy-Speaker. It is true that the Government put the business down and that you cannot direct the Government as to how they put business down, but if they put it down in a way in which the House is being embarrassed and put into difficulties, surely the House should be the master and should have the right to decide whether it will take a given item of business at one moment if doing so prejudices the proper consideration of that business.

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

I agree with the right hon. Gentleman to some extent, but not only have the Government the right to put down the business in what order they think fit, but my recollection is that this business was announced last Thursday.

Photo of Mr James Callaghan Mr James Callaghan , Cardiff South East

Certainly the business for today was announced, but we assumed that it would follow the normal order, namely, the Expiring Laws Continuance Bill would come first and the Public Works Loans Bill would come next. We were surprised to see the Order Paper in this form.

Photo of Mr Arthur Blenkinsop Mr Arthur Blenkinsop , Newcastle upon Tyne East

Further to the point of order. I think we should make it quite clear that the statement made by the Financial Secretary to the Treasury puts the House in an almost impossible position because he has discussed the whole issue in very great detail in spite of the Ruling given by the Chair. That does mean inevitably that we are going to have a full discussion on the Expiring Laws Continuance Bill on the basis, so it is assumed, of the Bill which is before the House and which it is quite impossible for the House to discuss.

Photo of Sir Eric Fletcher Sir Eric Fletcher , Islington East

As you were not here, Mr. Deputy-Speaker, when the matter was raised, would you allow me to recapitulate how it arose? I think you will agree that the Motion which my hon. Friend moved was really moved in the interests and for the convenience of the House.

In view of the fact that there is an Amendment down to the Expiring Laws Continuance Bill concerning the removal of the Act of 1945 from the Statute Book, when we come to that Bill inevitably, as matters stand, we shall need to have a debate to see whether Section 1 is to remain in force or not. The difficulty we are in is this; if we proceed with the Second Reading of this present Bill at the moment we shall not know what is to happen on the Expiring Laws Continuance Bill.

Therefore, we shall have to debate the present Bill both on the footing that the Amendment to the Expiring Laws Continuance Bill is carried and also on the footing that it is not carried. That in itself must involve a very long and complicated debate on this present Bill, because, until that decision has been arrived at, we shall on this Second Reading have to direct all our speeches, first on the assumption that that Amendment is carried on the later Bill, and secondly on the assumption that it is not carried.

I think the Leader of the House would agree that that cannot be for the convenience of the House. It cannot be convenient that in deciding whether we should give a Second Reading to the Public Works Loans Bill we should have to do so in complete ignorance of what, as the Financial Secretary himself recognised, is the most important question with which this House is confronted this year, namely, whether or not Section 1 of the Act of 1945 is to be continued. That is the subject which has given rise to so much consternation in the last few days in the Press and among local authorities. It is something of vital interest to local authorities and it should be cleared up.

It emerged from the speech of the Financial Secretary that there are all kinds of questions which must be probed on this subject before we can make progress. He spoke as if the removal of a restriction was all that is involved in the abandonment of Section 1. But that is not so. Although Section 1 was a restriction in the sense that it said local authorities could not borrow from any other source, the corollary of that restriction was that they had a practically unfettered right to borrow when they liked from the Public Works Loan Board.

What is bothering local authorities is what is to be the situation if Section 1 is removed and if the local authorities have what the Financial Secretary has called freedom. Are they also to have the certainty they have had during the last five years that they can get money when they want it? That is the problem involved here, and it is the problem which has to be debated at some length before we can give a Second Reading to this Bill.

We cannot debate that question unless and until we know whether Section 1 is to remain in force or not. I therefore urge, for the convenience of the House and in order to avoid duplication of speeches and the double length of speeches, that the House should accept the Motion moved by my hon. Friend.

Photo of Sir Austen Albu Sir Austen Albu , Edmonton

We noticed the business that was announced last Th0ursday, but of course the Bills were not published, and therefore we could not know whether the Government were proposing to continue Section 1 of the Local Authorities Loans Act, and that makes a great deal of difference.

4.46 p.m.

Photo of Mr James Ede Mr James Ede , South Shields

I wish to put this point to you, Mr. Deputy-Speaker. The Financial Secretary to the Treasury took rather more than half the time of his speech in dealing with the effects of what he proposes to do later on in the Expiring Laws Continuance Bill. Now we have already been told it would be almost impossible, if not quite impossible, to discuss this on the Second Reading of the Expiring Laws Continuance Bill.

We shall have a different Chairman when we get into Committee of the whole House on that. We may be told on the Committee stage, if we attempt to move into the Bill the lines that in last year's Bill were included, which carried on this Measure, that there has been a substantial discussion now and that by giving a Second Reading to this Bill, in the light of what the Financial Secretary has said and the arguments he has advanced—which presumably we should be expected to counter, or at any rate we should not be ruled out of order in countering—the the House has already reached a decision on a matter which really comes up in discussion of another Bill.

If the order of the Bills had been the same this year as last, that contingency would not have arisen and we should have approached the Public Works Loans Bill, the Second Reading of which the hon. Gentleman has just moved, with a knowledge of what the House had decided under the Expiring Laws Continuance Bill. Surely it is desirable, if we are going to reach a decision on a matter of the importance that this obviously has, that it should be on a clear-cut issue and not on a side issue of another Bill.

Photo of Mr Charles Pannell Mr Charles Pannell , Leeds West

When Mr. Speaker was in the Chair, I think the relevance of the quotation with which the Financial Secretary opened his speech last year was generally admitted and I think this may assist you, Mr. Deputy-Speaker, to resolve the point of order. In introducing the Bill last year, the Financial Secretary said: it is the logical consequence of the renewal by this House last week of the Expiring Laws (Continuance) Bill."—[OFFICIAL REPORT, 23rd November, 1951; Vol. 494, c. 739–40.] In fact, the precedent of last year and all the precedents are that this Bill follows the Expiring Laws Continuance Bill and does not precede it.

I submit that a great deal of commotion and confusion has been caused in the minds of local authorities on this matter. I have before me two Press cuttings from two different sources, which I do not think can be assailed—from "The Times" of last Saturday and the "Observer" of last Sunday. The difference is rather curious and shows how the Government have local financial circles quite dizzy about their policy. I should like to read the quotations.

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

I think this is going into the merits of the two Bills. We are really dealing with a point of order on whether the debate should be adjourned. I have given my Ruling quite clearly, I think, that the Government are entitled to put the business on the Order Paper in any order they like, and we can deal only with one Bill at a time.

Photo of Mr Charles Pannell Mr Charles Pannell , Leeds West

Further to that point of order. I do not think there has been any contradiction here of the fact that the Government can do any silly thing they like, but what we are saying is that the House should reasonably be the master Of its own business if the order of busi- ness is likely to make the House look ridiculous in the country. We do not mind the Government looking ridiculous in the House and in the country, but we object to the House looking ridiculous.

Several Hon. Members:

rose

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

If I may deal with one thing at a time, I would say that it would not be the House that would look ridiculous. It is not the House that selects the order of business. It is the Government who select it, and it is their affair, although the House may not agree with them.

Photo of Mr Herbert Morrison Mr Herbert Morrison , Lewisham South

If I may say so, with great respect, Mr. Deputy-Speaker, that puts the Government in a position of complete dictatorship over the business of the House. I quite agree that in Government time the Government have the right, in the ordinary way, to put down such business as they like, but surely if it is a matter of a serious argument, as this is, that by taking one Bill first instead of taking it after another Bill the House would be cramped in its scope when it comes to consider the Bill which it is intended shall be taken second, surely the House has the right to protect itself against the Government? Otherwise, the Government could—I say this without wishing to be offensive—play all sorts of tricks with the business of the House which would involve the House in great difficulties.

I submit with great sincerity and conviction that this is a serious matter of constitutional principle concerning the order of business. I submit that it is for you, Sir, to judge whether this is a point of substance which is being raised or not. If it is, I think it would be a grave interference with the constitutional rights of Parliament if the House could not take such steps as are open to it in order to see to it that the order of business is taken in a logical and sensible way which will protect our rights.

Photo of Mr Geoffrey De Freitas Mr Geoffrey De Freitas , Lincoln

On the question of timing, and to show the importance of it, may I draw your attention, Mr. Deputy-Speaker, to the fact that the point has been made that we require to have in this case the reactions of the local authorities, and we do not know what they will be? They do not know whether Section 1 will be in the Bill or not.

Many hon. Members will recall the difficulties we got into in the spring and early summer on the Housing Act because of the matter of timing, which again the Government arranged. We did not discuss it when discussions with local authorities were going on, and we could not know what was being discussed. The Ministers concerned sent, in confidence, to my hon. Friend the Member for Wellingborough (Mr. Lindgren) and myself, who were on the Front Opposition Bench, copies of letters which they had sent to the local authorities. They tried to help us, but we were naturally gagged because the letters were sent to us in confidence.

We had the information and could not use it; the rest of the House had not got the information, and the debate was of a much poorer standard than it would normally have been, considering the wide experience of many of my hon. Friends in housing matters, because they did not know the reactions of the local authorities. Unless we take the point of view which has been urged upon you, Sir, we are in grave danger of running into the same difficulty again and not doing justice to the House and to the knowledge of Members on this side of the House.

Photo of Mr Francis Bowles Mr Francis Bowles , Nuneaton

I have not the Standing Orders before me, Mr. Deputy-Speaker, but my recollection is that the Chair, on a Motion to adjourn the debate, says to itself, "Is this a dilatory Motion or not?" I submit that merely to suggest that the Government have chosen the order of business and that that is enough, that no argument would impress you, Sir, even though perhaps they have been rather foolish in doing that, is not sufficient. The argument has been put most forcibly from the benches on this side of the House, with great respect, that you have not refused the Motion for the Adjournment on proper grounds. I should have thought that to say that the Government are masters of their own business is not really enough. I submit that it has been made clear that this is no dilatory Motion to adjourn the debate.

Photo of Mr Reginald Paget Mr Reginald Paget , Northampton

On the constitutional question which my right hon. Friend raised, surely the position is that the Government have the right to propose legislation and to propose its order, but when they have proposed the order it is then the right of the House to say whether it will accept the Government's proposal. I understand, as my hon. Friend the Member for Nuneaton (Mr. Bowles) said, the position to be that if a Member wishes to challenge the Government's proposal as to order, it is for the Chair to decide whether that challenge is merely dilatory or one of substance. I submit that it is quite obvious that this Motion is one of great substance; and that, therefore, we are entitled, as a matter of the Constitution, I would put it to you, Mr. Deputy-Speaker, to challenge the Government's proposal. That is what the House of Commons is here for.

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

Yes, and if the House objects to giving the Public Works Loans Bill a Second Reading, it is entitled to negative it.

Photo of Mr James Callaghan Mr James Callaghan , Cardiff South East

With great respect, Mr. Deputy-Speaker, we feel that we have made a very important point of substance. This is no mere procedural matter. I did try to explain that this is really a matter which goes very much to the root of both these Bills. If I may quote from Standing Order No. 26—these words are very important—it states: If Mr. Speaker, or the chairman, shall be of opinion that a motion for the adjournment of a debate … I omit some words— is an abuse of the rules of the House, he may forthwith put the question thereupon from the chair, or he may decline to propose the question.… I ask you, Sir, most earnestly, if it is your view that what we have put forward, the considerations we have advanced, are an abuse of the rules of the House? I do not believe that you think that.

These are, as we have tried to explain, important matters of substance. They go to the root of how much money we are to vote on this Bill, the conditions under which the local authorities are to be treated and what is to be their position in relation to this policy. All this could be disposed of quite easily if we could proceed to a discussion of the Expiring Laws Continuance Bill, upon which this matter is raised, and we would then gladly return to the debate on the Public Works Loans Bill, and the Government would have no difficulty in securing a serious discussion on it. I submit to you, Sir, that what we are putting forward is not an abuse of the rules of the House. Will you not allow the House to decide whether this is a Motion which should take precedence?

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

No, I think I gave my Ruling quite clearly. [Interruption.] There is no need to throw books about. I gave my Ruling pretty clearly. The Government have the right to put their business on the Paper in the order they wish. This Bill has been put down as first order. That may have been wrong from the point of view of some Members, but that is not my business, and I shall not accept the Motion.

Several Hon. Members:

rose

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

I have given my Ruling. There is really nothing more to be said.

Photo of Mr Herbert Morrison Mr Herbert Morrison , Lewisham South

Numerous references have been made to the Leader of the House. I have held that position, as has my right hon. Friend the Member for South Shields (Mr. Ede). The Leader of the House really has a responsibility not merely to his own party and the Government but to the whole House. I put this to the right hon. Gentleman: Ought he not to be willing to re-adjust the business? I ask that quite apart from the point of order in respect of which I am very sorry that you, Mr. Deputy-Speaker, have given the Ruling which you have—but there it is.

May I ask the right hon. Gentleman, as Leader of the House, and as Leader of the whole House, whether he will not, on this point of substance, now voluntarily re-adjust the business in order that we may handle it in a more logical and rational way than is proposed? I ask him that arising out of his duty to the whole House of Commons.

5.0 p.m.

Photo of Captain Harry Crookshank Captain Harry Crookshank , Gainsborough

I was not reluctant to speak, but there was a series of points of order which were not between myself and the Chair but between those who raised the points of order and the Chair. Therefore, I had no locus to say anything at that stage. I was unfortunately not here during the earlier part of the debate; I do not think anybody expected me at that time; but I have heard what has been said just now, and I should like to put myself right with hon. Gentlemen opposite by reminding them of what did happen last Thursday. This is not a sudden change in the business of anything of the sort. The business of the House, as the right hon. Gentleman knows, is announced on the Thursday in the order in which it is to be taken on the respective days—

Photo of Captain Harry Crookshank Captain Harry Crookshank , Gainsborough

I hope the right hon. Gentleman will let me finish my sentence. It is announced in the order in which it is going to be taken on the respective days; and if for any reason there is an alteration, as is very frequently done as the result of something through the usual channels, it is always announced from here. That is the usual practice and custom of the House.

Let us see what happened in this case. I announced the business for today: WEDNESDAY, 12TH NOVEMBER—Second Readings:Public Works Loans Bill.Civil Contingencies Fund Bill.Expiring Laws Continuance Bill.Committee stage of the necessary Money Resolutions."—[OFFICIAL REPORT, 6th November, 1952; Vol. 507, c. 299.] Nothing could have been a clearer indication of the order in which the Government had in mind to take today's business. The Bills were in the hands of hon. Gentlemen; they went round on Thursday morning, so that there is nothing which has happened since, except possibly the ingenuity of hon. Members, or their afterthoughts on considering the Bills. The Bills had been sent when I made the statement. Since then no representations through the usual channels, or approaches to me personally, have been made by anybody at all to say that this was the wrong order or that it would be more convenient to begin with another Bill—nothing at all. If the normal practice of the House of settling business is not to be followed, I do not know where we are going to get.

Photo of Mr Reginald Paget Mr Reginald Paget , Northampton

Will the right hon. Gentleman permit me—?

Photo of Captain Harry Crookshank Captain Harry Crookshank , Gainsborough

I really hope I may say—[interruption.]—no, I was not here all the time. I have already admitted I was not here; but I was here when the Motion was moved and I have heard all the points of order. I am merely explaining how the machinery of busi- ness works. An announcement is made and, of course, it is stuck to unless further representations are made and a further announcement made, for the simple reason, as the right hon. Gentleman has reminded me, that it is part of my business to try to meet the convenience of the House as a whole. Nothing would be more inconvenient to the House as a whole than to come to discuss Bill "A" and suddenly to find Bill "B" turn up. What is suggested would happen if hon. Gentlemen wanted to discuss Bill "A" and Bill "B" came up at 5 o'clock?

Photo of Sir Austen Albu Sir Austen Albu , Edmonton

That is exactly what is happening.

Photo of Captain Harry Crookshank Captain Harry Crookshank , Gainsborough

No, that is not what is happening. If the rules of order have permitted allusions and discussions of points in other Measures, that is another matter; but the Bill under discussion is the first Order of the Day for today.

I appreciate the points which the right hon. Gentleman made, of course, but I put this to him. How does he think the business of this House or the convenience of hon. Members is to be met if the business for every day is to be at risk at any time? Surely the proper way to do it is the way in which it has always been done till today; that is, if there is any objection taken let it be made through the usual channels and—[HON. MEMBERS: "It is being made."]—at the proper time, and in the proper way before business begins. I am talking about what happened last Thursday. There has been plenty of time since then to approach me. I am quite approachable. I am in the House quite often and I do not think hon. Members would have any trouble in contacting me to tell me anything they wanted, even though they did not care to go through the usual channels, and I would always consider it.

I think that today nothing will be lost by saying now, as you, Mr. Deputy-Speaker have ruled, that we should deal with this Bill. When all is said and done, I gather—though, again, I am not saying I know all the details of this Bill, because I do not—that the Bill the Second Reading of which has been moved is not an annual Bill. It is not tied to any time. Its borrowing powers could be all used up in 24 hours if it so happened. Therefore, I do not see that by discussing this Bill we are prejudicing anything which might happen under any other legislation. I am not an expert on the Bill, but I know it is not an annual Bill and there is no fixed period for drawing the money available. To that extent, therefore, I think it dovetails in with the other Bill, and does not make discussion impossible.

As you, Mr. Deputy-Speaker, have given your Ruling, I would advise the House that it should carry on with what was announced on Thursday, when no one said a word to the contrary, and get on with this Bill now.

Photo of Mr Herbert Morrison Mr Herbert Morrison , Lewisham South

May I put to the right hon. Gentleman that he has merely stuck to his guns, and has not met the point? We are discussing a concrete point of the convenience of the House, and as to that he has said very little or nothing. As a matter of fact, it is true that the business of the House was announced, but it does not follow that it is taken in the order announced on Thursday.

Photo of Mr Herbert Morrison Mr Herbert Morrison , Lewisham South

It does not necessarily follow.

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

I hope the right hon. Gentleman is not discussing my Ruling?

Photo of Mr Herbert Morrison Mr Herbert Morrison , Lewisham South

I was appealing to the Leader of the House. I would not in the least like to make difficulties for the Chair, and I hope that the Chair will not make it difficult for the House to discharge its duties.

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

I do not know what the right hon. Gentleman means. So far as I am concerned, I am making no difficulties. I am simply here to carry out the rules of order, and I am doing my best to do so.

Photo of Mr Herbert Morrison Mr Herbert Morrison , Lewisham South

I am much obliged, Sir. I put it to the Leader of the House that the order in which business is announced can be adjusted. He says we should have made representations before, but as a matter of fact the question which has arisen arose this afternoon out of the speech of the Financial Secretary. We were not to know what the Financial Secretary was going to say before he said it. It was because he said what he did say that my hon. Friends thought it right that the order of business should be changed.

Of course, it is perfectly true, as you, Sir, have said, that the House could reject the Bill. That would be an interesting situation and it could create all sorts of difficulties; but it is not very likely that we shall be able to do so. I submit to the Leader of the House that, in view of the situation which has arisen, apparently owing to the nature of the Bills, but more directly arising out of what the Financial Secretary himself had said, that he really ought, in his responsibility to the whole House, to be willing to make an adjustment in the business.

Photo of Major Geoffrey Bing Major Geoffrey Bing , Hornchurch

If I may say a further word on the point of order addressed to you, Mr. Deputy-Speaker, by the right hon. Gentleman the Leader of the House, and to which you have not as yet—

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

We have been dealing with this point of order almost the whole time I have been in the Chair and I think I have made the position clear so far as I could. I do not see any point in pursuing it further.

Photo of Major Geoffrey Bing Major Geoffrey Bing , Hornchurch

With very great respect, Sir. I was proposing to advance to you reasons why, in my submission, you should consider it further in the light of what was said by the Leader of the House; because the arguments which he put forward are, with respect, completely erroneous. If it is on those grounds that you are being asked to refuse to accede to this Motion, then certainly, in my respectful submission, you should depart from a Ruling which obviously you had to come to without having heard the previous debate which took place when Mr. Speaker was in the Chair.

In the first place, it is not, as the right hon. Gentleman says, that the Government always announce the order of business, in fact an occasion occurred when not only was business brought which had not been announced by the Government, but it was business which appeared on the Order Paper below Supply. Therefore an argument based on the announcement of business would have no validity whatsoever.

This argument for the Adjournment arises out of a statement made by the Financial Secretary. You may or you may not consider, that that changes the situation; but, in my submission, it is for the House to decide. Obviously there have been occasions in the past when debates have been adjourned, and they cannot all have been out of order. Therefore, there must have been some of them in order, and in my submission it is obviously in order, when a situation has arisen out of a speech which shows that the House cannot properly consider a Measure until it knows what is being done in regard to a future Measure, that the one debate is postponed so that it may be taken after the other.

You said, Mr. Deputy-Speaker, that the House could reject the Bill, but that would not meet the point. The House might want to alter the Bill in the light of the decision which they come to upon another matter. We are now being invited by the Financial Secretary to the Treasury to give this Bill a Second Reading on certain assumptions which it is impossible for the House to debate. For example, the global sum which will be required to be borrowed for housing is a figure which we must know. Obviously we must have an opportunity to discuss the total housing programme, but if the local authorities can go elsewhere for their money then that might not be relevant.

The Ruling on what is or is not relevant in this debate must depend on what decisions are taken on a later Bill. A solution to this difficulty was proposed by my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) when he suggested that the debate should be adjourned. You have power to put that Question without further debate, and I wish respectfully to suggest to you that if that course were taken we should solve the problem of all these points of order, and that if it had been done earlier we should have saved considerable time.

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

That is true. I could have put the Question forthwith. I did not choose to do so. I gave my Ruling. There is nothing more to be said.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

Would not it help us out of the difficulty if the Leader of the House would tell us why the Government reversed the order of the Bills which has been followed every year since the war? Was this a piece of confusion in Government business or was there some other reason?

Photo of Captain Harry Crookshank Captain Harry Crookshank , Gainsborough

I was not asked that question last Thursday when it might have been asked. The reason was that I understood that this Bill was very urgent.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

But if we were asked to debate both Bills on the same day, and if the Bill we are asked to take first depends on the second, how can that possibly have been a valid reason?

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

The Question now before the House is, "That the Bill be now read a Second time."

5.12 p.m.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

The House has certainly been put in a most extraordinary position. We have been asked to debate this Bill in a quite contrary order to the order in which it was debated last year and the year before and, so far as I know, every year since the war. Neither the Financial Secretary nor the Leader of the House has given us any adequate reason for the reversal of the order of these Bills. However, though we feel that we are in a great difficulty, I will do my best to make some observations about the Bill now before us.

The Financial Secretary, here at least in accordance with precedent, took a fairly broad view of the significance of this Bill and spoke of a number of matters associated with it. He spent much the greater part of his speech discussing the other Bill, but he did make some reference to this one. We consider that this is a most important Bill which provides for the expenditure of hundreds of millions of public money.

We also welcome this opportunity because it is one of the few chances we get of discussing the question of interest rate policy, which has a lot of bearing on our economic policy generally. It is one which we do not often get much chance to raise in this House. We do not agree that it is convenient to take these Bills in this order, but I will do my best to direct some attention to the Bill itself. I am glad to see that the Minister of State for Economic Affairs is now here as well as the Financial Secretary.

This year's Public Works Loans Bill, unlike its predecessors, starts with a list of loans which the Financial Secretary is asking permission to write off. He did not say a great deal about them, though they occupy six pages of the Bill. I do not know whether he was so dazzled by the enormous figure of over £4,850 million a year which the Government spend both above and below the line—incidentally, that is far more than we ever spent—that he thought that these mere thousands were not worth any mention.

No doubt the detailed items here will require to be discussed in Committee. But the House should pay attention to one loan which the hon. Gentleman mentioned. That is the sum of £39,940 19s. 11d. which is to be written off on account of the Kenfig Homes, Limited. The Financial Secretary said, rather slyly as I thought, that this was explained fairly fully in the Bill, that it "spoke for itself" and that he would say no more about it. I do not know how many hon. Members have looked at the observations in the Bill about this loan. They seem to me a most interesting comment not merely on why this money was lost, but on some of the social history of this country during the last 20 or 30 years.

I note that 170 houses were erected at Kenfig Hill, Port Talbot, between the years 1921 and 1924. Then the Bill tells us: Soon after the houses were occupied there was serious unemployment in the district and economic rents could not be maintained. Reduced rents failed to keep the houses tenanted. … In 1928, when about 70 houses were vacant, the Commissioners took possession of the Estate. Despite further reductions of rent the Commissioners were unable to let all the houses until the war years, and no worth-while offer was received for their sale. So in these years of pre-war Tory rule, though the population was not very much different and the real housing shortage was as great as it is now, the distribution of incomes was such that we had these newly-built publicly-owned houses, in an industrial area, remaining empty for years on end. Then the Bill completes this interesting story by saying: After the war the houses continued to be fully occupied and the Commissioners were able to raise the rents.… In April, 1950, the Commissioners were able to sell 154 of these houses to the sitting tenants. That is a nice parable of depression and revival in South Wales, which not even the bureaucratic language of the Bill is able completely to obscure.

Photo of Mr Robert Mellish Mr Robert Mellish , Bermondsey

Will my right hon. Friend also call attention to the fact that in this area, thanks to the Labour Government, we now have the famous Margam Steel Works and that the people cannot get enough houses to rent?

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

That, I believe, is true.

Clause 1 of this Bill authorises the issue of loans to local authorities not exceeding £500 million. We, of course, are wholly in favour of this method of finance, which has worked well for all concerned since the war. The Bill sets the limit, as last year, of £500 million. There is one question I wish to ask about this Clause.

I expect that the Financial Secretary will remember that in this year's Financial Statement, issued under his name, it was estimated on page 34 that loans to local authorities in the financial year 1952–53 would come to £360 million, compared with £365 million in the year 1951–52. That suggests to me that last March the Treasury did not expect any increase in local authority expenditure on houses—the largest item—during the present year compared with the previous year; or else that they estimated there would be a heavier reduction on such items as school building as would offset the increased expenditure on housing.

The Minister of Housing and Local Government now tells us that more local authority houses are being built this year than last; and the Minister of Education says that more schools are being built this year than last. What is the explanation of this rather curious discrepancy? Is it that the Minister of Housing and Local Government has simply ignored the Chancellor's instructions? We know that in this Government the Chancellor's official relations with the Minister of Housing and Local Government are almost as strained as are those with the Paymaster-General. Will the Financial Secretary tell us whether it is the Chancellor who was incorrect in the figure he gave the House in the financial statement, or the Minister of Housing and Local Government who is incorrect in boasting that more local authority houses are being built this year than last year?

I do not know whether we can have this information right away from the Financial Secretary. I understood him to say that a sum of £399 million had already been spent out of these loans up to the end of November. If that is so, something must have gone seriously wrong with the programme for the spending of £360 million in the whole 12 months incorporated in the Budget last March. This is something which clearly requires explanation.

Clause 2 of the Bill makes a change in that it raises the total of advances plus commitments to £1,050 million, compared with £950 million last year and £850 million the year before that. We did not have any explanation of that today, though we had some comment on the difficulty of arriving at the right figure. The Financial Secretary did not tell us, as far as I could make out, why it was £100 million higher this year than last.

Photo of Mr John Boyd-Carpenter Mr John Boyd-Carpenter , Kingston upon Thames

The right hon. Member may not have been listening at the time or someone may have distracted his attention by raising a point of order, but I did point out that the commitment figure in the existing Act was running very close to the limit, and that was one of the relevant factors in fixing the higher rate this year.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

I have a note of that, but what I want to know is why that figure is running at a higher level this year than last. The hon. Gentleman may recollect that two years ago, when I was trying to explain the increase, I told the House that local authorities were now able to plan rather further ahead with more long-term schemes like schools, and that meant that the total of commitments had to be raised, even though the actual expenditure was not going up. It seems to me that that makes the matter a little more clear—if it is the correct explanation—than when the hon. Gentleman last year merely said he wanted to "allow a somewhat larger margin for contingencies." Perhaps he would give us an explanation of that a little later on. It is not very easy under the present Government to discover whether some of these totals of expenditure are going up or coming down. But we are being asked to authorise a sum of £1,050 million, and I think we ought to know the answer.

Our main quarrel with the Government on this matter is, of course, not the issue of money under this Bill, but the rate of interest which will be charged on it, and their policy generally in that matter. The Financial Secretary very rightly last year said that these two matters were "so closely interlinked and interlocked"—those were his words—that it would be somewhat artificial to try to discuss one while completely ignoring the other.

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Kidderminster

Could you, Mr. Deputy-Speaker, give us your guidance on the vexed question of the rate of interest charged by the Public Works Loan Board in connection with the capital sums we are discussing under this Bill? Is it in order for hon. Members to develop arguments about the merits or demerits of any particular interest rate, the interest rate policy generally, or the financial policy of the Government where it impinges upon this Bill?

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

If I had heard the right hon. Gentleman the Member for Battersea, North (Mr. Jay) say anything that was not in order I should have stopped him.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

I was going to say that it was very much to the convenience of the whole House when Mr. Speaker last year, and the year before, agreed with the submission of the Financial Secretary that these matters should clearly be interlocked and could not be discussed one without the other.

The policy of the Labour Government, despite the changes in the rate at which the Treasury itself could borrow in the open market, was consistently to prevent the rate charged to local authorities for these loans from going above 3 per cent. We did that to keep down the cost of housing, school building, water undertakings and other local authority capital expenditure.

We also did it because, of course, we believe that it is really absurd and antiquated to try to control the expenditure of local authorities on housing and these other public services by the jerking about of interest rates. Our view always was that it would be much better that these programmes should be planned in the light of public need and of the availability of building resources in any neighbourhood, and so on.

But the present Government thought they knew better a year ago, and raised the rate, as the House will remember, from 3 per cent. to 3¾ per cent. and then again in February to 4¼ per cent., where it stands today, for loans of 15 years and upwards. Looking at the matter arithmetically, that rise represents the equivalent of something like 5s. to 10s. a week increase—according to the size of the house—in the rent of a local authority house throughout the whole of its life of 60 years.

I know that the Government last year—and we discussed this point a good deal a year ago during the equivalent debate to today's—increased the housing subsidies to cover most of that extra charge for housing, thereby, incidentally, making the whole manœuvre appear to some people rather pointless, as well as upsetting the extremists among their supporters who want to cut Government expenditure at almost any price.

I should, therefore, like to make two comments on this part of the Bill. The first is this. Will the Financial Secretary assure us that the Government mean to continue, and will continue, this policy in future, and that housing subsidies will be raised to cover any further increase in interest rates? We ought to be quite clear about that before the end of the debate today. We feel some anxiety about this, as do local authorities and their tenants. The remarks of the hon. Member for Kidderminster (Mr. Nabarro) about the Welfare State will increase that anxiety at a time like this when he and other extremists opposite are demanding a Geddes axe and all the rest of it.

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Kidderminster

Would the right hon. Gentleman, for the benefit of the House, tell me when I talked about a Geddes axe and, secondly, what reference I made only to the Welfare State? I said, and evidently the right hon. Member did not hear me, the "Welfare State unlimited," which is a different matter altogether.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

That phrase, uttered in a scornful tone of voice, will tend to increase the anxieties of my hon. Friends. At any rate, if these anxieties are to be allayed it is for the Financial Secretary to give the assurance for which I asked.

We, of course, are particularly anxious to hear the views of the Minister of State for Economic Affairs on this, not merely because we had to sit right through the debate on the address without having any enlightenment from him at all, but also because it was indeed in a debate similar to this last year that he announced that there were to be great and grave economies both in local and in national expenditure. That was the first hint that we had of the coming attacks on education, the Health Service, food subsidies and many other things. For that reason alone we are very anxious to hear his views this afternoon, and particularly his views on the housing subsidies.

This Bill, of course, does not merely authorise loans for housing and our anxieties, therefore, are not confined by any means to housing. About one-third of the loans in recent years have been made for other purposes such as schools, roads, water, and so forth. The Financial Secretary gave the figure today and I think that it maintained a ratio of roughly one-third to two-thirds.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

I note that in the Public Works Loan Board Report for 1951–52 as much as £170 million out of a total of £475 million were for non-housing purposes. Since there is no corresponding increase in subsidy in the case of these other services for which this money is spent, there is, of course, a genuine increase in the cost if the rate of interest is raised. The Government, in effect, are simply imposing a new tax by this method on the local authorities and the ratepayer.

How is it that they justify this steep rise in the interest rate, first from 3 per cent. to 3¾ per cent., and now to 4¼ per cent.? I gather that it is supposed to be part of their general dear money policy, a policy which, incidentally, has increased public expenditure already and "the crushing load of taxation" on the taxpayer which, if not the hon. Member for Kidderminster, some other hon. Members opposite are always complaining about, by just about £100 million a year.

That is my calculation and if the Financial Secretary and the Minister of State for Economic Affairs do not accept that they will have to explain why the increase in the debt interest bill in the first five months of this year is running at almost exactly that rate. I wonder if the Geddes axe fraternity opposite have realised that under this Government there has been an increase of the order of £100 million in spending on debt interest this year, and that to put it in perspective, that it is actually as much as the whole cut in food subsidies.

In addition, it can hardly be maintained that this has had a substantial effect in assisting our general economic recovery, because I am sure that right hon. Gentlemen on the Front Bench opposite will have noticed that the total of bank deposits in the very latest month are almost exactly at the same level as they were a year ago. That is an extremely expensive method of achieving no result at all. Incidentally, I do not know why the right hon. Gentleman the Member for Haltemprice (Mr. Law) and the right hon. Gentleman the Member for Blackburn, West (Mr. Assheton), who are usually so keen on making these economies, have not joined this debate or, apparently, come into the Chamber this afternoon.

I should like to make it quite clear that we on this side of the House are not opposed to credit restraint as such. What we are opposed to is the increased burden on the Exchequer and the taxpayer. But even if a defence could be made—and we have never heard it substantiated yet—for the dear money policy generally, why does this extra burden have to be imposed on these loans to local authorities? We might accept the general case, but there still would be the very important question whether the burden needs to be extended to public authorities.

In the last years we have had most interesting arguments on the Public Works Loans Bill about this very point. The Financial Secretary did not attempt to defend his policy today, but last year he went back to the doctrine enunciated by Sir John Anderson, as he was then, in 1945. He did not quote him, but he was enunciating his doctrine, and he maintained that the Treasury must charge whatever rate it was itself having to pay in raising the money on the market.

I must say that even the theoretical force of this argument has always seemed to me to vanish away in conditions where the Treasury is not, in fact, borrowing the money at all. Under the prudent—I had almost said "conservative," but the word might be open to misunderstanding—methods of finance pursued under the Labour Government, the whole of the revenue required for these loans was drawn from surplus above the line in the Budget, and was not borrowed at all. That in itself was a justification for keeping the rate of interest down to 3 per cent., if any further justification was needed.

The Financial Secretary might argue tonight, though he has not done so yet, in the following way. He might point out that though the Government Budget plan this year was to raise very nearly enough above the line to finance these loans, nevertheless, that plan has, in fact, gone wrong; and that in the first seven months of this financial year the total Budget deficit has been £300 million larger than it was in the last year of the Labour Government, and that there has been a deficit above the line of £382 million. That is quite a new feature in our financial experience since the war.

Those are the Chancellor's own figures. I suppose, therefore, that he might argue that the Government really are now having to meet all this below the line expenditure from borrowing, particularly as we heard yesterday that there will be additional Supplementary Estimates on top of the very large expenditure which we have incurred already. Is that the Financial Secretary's argument? I should like very much to have an answer to that. If it is, it cannot be very comforting to the Geddes axe school of thought on the other side of the House.

It is indeed a very ironical situation, because one of the main reasons why we have had this big deficit this year is, of course, the very large increase of public debt interest due to the high cost of borrowing. In fact, it is the Government's own policy of borrowing at high cost which is forcing them to borrow more, and causing the interest bill to increase still further. I hope that the hon. Gentlemen opposite will also study that point.

Nevertheless, even if we do accept that very pessimistic argument that we have got so far into a deficit now that all this money has to be raised by borrowing, the Government's defence is really very hard to follow. Last year the Financial Secretary retailed to us the pure milk of Sir John Anderson's doctrine about charging the local authorities what the Government itself had to pay. But no sooner had he enunciated this doctrine than he ran away from it in the course of the year. The rate went up to 41¼ per cent. in February in accordance with the rise in the yield on gilt-edged.

But, of course, that was not the end of the fall in gilt-edged prices. In July and August gilt-edged prices went so low that the yield was up for a long time to 4¾ per cent. According to the Financial Secretary's doctrine, he should have pushed the Public Works Loan rate up to 41¾ per cent. But at that point he and the Chancellor of the Exchequer ran away from their own doctrine, and left the rate at 41¾—thus admitting in effect that we were perfectly right in our contention that the two rates need not march together, and removing his whole justification for having raised it above 3 per cent. at all. I wish he would tell us why the rate could not have stayed at 3 per cent. all the time.

In any case, what is the Financial Secretary's doctrine now, and what is his policy for the future? He might say that the reason for the drop in gilt-edged,. and its effect on interest rates in July and August, was the result of the Prime Minister's notorious "trap-door" speech. It is true that the Prime Minister's incursions into public discussion on economic policy frequently lead to severe slumps in gilt-edged prices and loss of gold to the Treasury, as did that particular speech in July.

Is that the Financial Secretary's doctrine, that the Public Works Loan Board cannot be expected to jerk its rate about this way and the other in accordance with the vagaries of the Prime Minister's orations? If that is his doctrine, I think I could understand it. Indeed, one must have some sympathy with the Chancellor, with a trap-door opening under his feet one day and a millstone being hung round his neck the day after.

We are in a very queer position this afternoon because of the order in which we are discussing these two Bills, but I think that since it was Mr. Speaker's Ruling that the Financial Secretary was in order in referring to the matter of the Expiring Laws Continuance Bill today and the discontinuance of the Local Authorities Loans Act, 1945, 1I must make just a brief comment on the arguments which he advanced.

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

I did not personally give that Ruling.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

I know, Mr. Deputy-Speaker, but I think we all agree with your predecessor that we may now say something about this today, but, of course, our full rights to discuss it on the Expiring Laws Continuance Bill itself are still preserved.

If the Financial Secretary were doing no more, as he claims, than giving local authorities extra freedom, and taking no facilities away from them, he might make his action appear plausible. Indeed, what he said, I think, was that his purpose was to "expand" the facilities which were open to the local authorities for borrowing. But even so, I should like to ask him, as did my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan), whether, before reaching this decision, he studied the very cogent defence of the Local Authorities Loans Act, 1945, which was made by Sir John Anderson, the then Chancellor, on 24th January, 1945, for introducing this system by which all local authority loan finance was canalised through the Public Works Loan Board and away from the so-called free market in the City.

Sir John Anderson then said that the local authorities' programmes must be financed in an orderly manner, and as cheaply as possible. There must be no scramble between competitors for capital, and everything must be done that is necessary to maintain effectively the Government's cheap-money policy."—[OFFICIAL REPORT, 24th January, 1945; Vol. 407, c. 908.] That was his defence of this compulsion, which the hon. Gentleman is now sweeping away.

Are we to understand that the present Government have abandoned Sir John Anderson's objective, not merely of cheap borrowing by local authorities—and that is fairly evident—but orderly borrowing as well? Are they really wanting to go back to what Sir John Anderson described then as a scramble? We ought to have that made quite clear.

What we fear is that there is more in this change of policy than the Financial Secretary told us this afternoon. We want to know whether the Government are, here again, giving way to those interests in the City which, of course, have made a lucrative business out of this in the past. We can mention some of those incidents later. The Financial Secretary said that he was doing nothing of the kind, and that what this arrangement in these two Bills would do—if I am in order in referring to them both—was not to "exclude" the local authorities from the City. But this is not what is being said by financial writers in the Tory Press. We have noticed before that the real intentions of the Government sometimes reach us from the Press, and not in the first instance from the Front Bench opposite.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

I am not going to quote the "Tribune" this afternoon.

Photo of Mr Charles Pannell Mr Charles Pannell , Leeds West

The hon. Member writes in it.

Photo of Sir Austen Albu Sir Austen Albu , Edmonton

He has an interest in it.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

I know the hon. Gentleman writes in the "Tribune." I was not actually referring to his writings, but I hope that he will be intervening in this debate later in order to carry on a little further his argument which I read in the "Tribune."

To remain in order, may I return to some remarks in the City column of "The Times" of 7th November. What we are being told in the Press is that this move is merely "paving the way"—that is the expression used—to a further step, by which the Treasury would force local authorities into the hands of the City of London. "The Times" actually said this on 7th November: At this moment, therefore, there is no incentive to even the most credit-worthy authorities to borrow independently in the market. It goes on: It is always open to the Treasury, however, to keep the rate at such a level relative to open market rates, that an incentive exists, and also to redirect applicants to the open market if suitable cases and suitable circumstances arise. I think we are entitled, in view of that sort of language, to regard the whole of this change at least with some suspicion and to ask for further elucidation.

I will quote only one more passage, although I could quote many. The "Financial Times," on 10th November, said: The critics"— and that appears to refer to the financial critics of the Government in the City, who think that they have not gone far enough in this direction— hint … that if local authorities were forced to go to the market for the loans they require they would be constrained to reduce their capital expenditure. That is a plain hint that this is the first step in the policy of withdrawing the Public Works Loan Board's facilities and forcing local authorities into the market in the City and, therefore, compelling them to trim or reduce their capital expenditure. That is why the whole of this other matter needs to be thoroughly probed.

I would therefore ask the Financial Secretary, as a first step in this discussion and so that he may allay these fears, to give an assurance that the Government will not follow any such policy as is there suggested, and that there will not be any alteration in the facilities given by the Public Works Loan Board to the local authorities, or any alteration in the policy which has been followed up to now.

Throughout all this we can see again the determination of the Government to make a half-concealed cut—not so much concealed now as it was last year, perhaps—in social service expenditure by local authorities through a rise in interest rates and through the redirection—to use "The Times" phrase—of the authorities back to the mercies of the City of London. This is all part of the retreat from planning and the determination to spend more on debt interest and far less on social services, which seems to have become the policy of the Chancellor since he was rebuffed on the resolution, of which we have heard a good deal, by the extremists at Scarborough.

For those reasons—unless we get a full and satisfactory assurance by the Minister of State for Economic Affairs later this evening—we shall regard this whole policy of dearer borrowing by local authorities with very great sceptism and anxiety.

5.52 p.m.

Photo of Sir Harmar Nicholls Sir Harmar Nicholls , Peterborough

It is becoming a dismal business listening to speeches from right hon. and hon. Members on the Opposition benches. They spend so much time in the past and, what makes it even worse, they make the same speeches this year as they made last year. They were not good then and they are less good now, as a rehash.

I want to refer to the main point of the right hon. Member for Battersea, North (Mr. Jay), which took up quite a big part of the time he took to make his speech. He referred to the increase in loan charges and tried to revive the old charge that the idea was to increase council house rents. We know that if local authorities had proceeded to build the same sort of houses with the extra interest charges the cost would have gone up and the rents would have gone up; but we encouraged and helped them to produce a house more efficiently, and the cost per house has gone down, which is in great contrast to what happened when the party opposite were in office.

They anticipated that the cost of a house would be between £1,000 and £1,100, and the subsidy of 10s. was based on that. Over the years the cost went up from £1,100 to an average of £1,650; so if people want to be reminded who put up the rents of council houses it was surely the party opposite who deliberately allowed the cost of a house to rise.

Photo of Mr Leslie Lever Mr Leslie Lever , Manchester Ardwick

Iis the hon. Member's party going to reduce the cost?

Photo of Sir Harmar Nicholls Sir Harmar Nicholls , Peterborough

It is being reduced. We are getting greater efficiency, and we are finding that local authority housing tenders are much lower than they were 18 months ago.

Photo of Mr William Hall Mr William Hall , Colne Valley

Will the hon. Member say whether this reduction is in respect of a house of the same size?

Photo of Sir Harmar Nicholls Sir Harmar Nicholls , Peterborough

It is for a house which meets the needs of the people, as has been proved by the satisfaction expressed throughout the whole of the country.

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Kidderminster

Is it not a fact that not a single house has been put up in the last 12 months which has not conformed to the Dudley standard approved by hon. Gentlemen opposite?

Photo of Sir Harmar Nicholls Sir Harmar Nicholls , Peterborough

That is true of the People's House, which hon. Members opposite now seem to deride, but which has been built from plans prepared by the right hon. Member for Bishop Auckland (Mr. Dalton), the predecessor of my right hon. Friend the present Minister of Housing and Local Government.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

Is the hon. Gentleman maintaining that houses of precisely the same size have been produced at substantially less cost?

Photo of Sir Harmar Nicholls Sir Harmar Nicholls , Peterborough

I am saying that as far as the council house tenant is concerned his rent is more likely to go down because of the efficiency we are producing than it was under the sort of leadership we had from the party opposite, when prices were always going up.

Photo of Mr Charles Pannell Mr Charles Pannell , Leeds West

I have been reading a speech which the hon. Member made last year. What he has to explain is why his Minister has fixed the price of the notional house under the Conservative Government at £1,525—and while he is thinking about that will he also cogitate on the fact that the dear money policy of his Government has, in effect, raised the rents of council houses—masked by the subsidy—by at least 5s. a week?

Photo of Sir Harmar Nicholls Sir Harmar Nicholls , Peterborough

The hon. Member knows the difference between the tender cost and the notional price.

The right hon. Member for Battersea, North (Mr. Jay) said that when we increased the subsidy to meet a possible increase of rents it caused dismay on this side of the House. The truth is that when we introduced the new subsidy figures it was on the opposite benches that dismay was caused. They had been up and down the country telling the people to expect a terrific increase in rents, at precisely the same time that they were telling the country that we were going to reduce the school-leaving age, and so many of their prophecies fell in the dust at that particular time that they had a rather rough time.

Photo of Mr Charles Pannell Mr Charles Pannell , Leeds West

On a point of order. Is this debate to range as wide as the question of the school-leaving age? If it is, and we are to have another Queen's Speech debate, we are perfectly prepared to accept it. We appreciate that the ramifications of borrowing—especially local authority borrowing—cut into the whole educational programme and particularly the question of the school-leaving age. I raised the point at this stage in order that I might be allowed the same liberty if I am lucky enough to catch the eye of the Chair later.

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

The question of the school-leaving age is outside the scope of the Bill we are discussing now.

Photo of Sir Harmar Nicholls Sir Harmar Nicholls , Peterborough

Considering the courtesy which I extended to the hon. Member in allowing him to intervene I think his last intervention was rather dusty.

The House should take note of the fact that so many of the speeches from the Front Bench opposite have concentrated on the past and have not given the attention to the problems of the present and future that we are entitled to expect from them as an Opposition who have had a full knowledge of Government as recently as 12 months ago.

I want for a few minutes to deal constructively with another aspect of the figures included in this Bill. We have been told that at present we are committed to £500 million, and that a further £1,050 million will be available. These are terrific figures and it is essential that everybody in the House should use his ingenuity to see if he can make a contribution towards bringing down those figures. They reflect the sort of taxation that is to be inflicted on our people, for taxation produces most of it.

Of this £1,050 million that is to be made available, something like 78 per cent. is likely to be used on public loans for housing—as has already been said—and it is in regard to that aspect that I want to submit one or two suggestions to my hon. Friend and to his right hon. Friend the Minister for Housing and Local Government. As far as the subsidies on housing are concerned, to cover the old Housing Acts up to the war about £12 million will be expended. On the prefabricated houses now coming to the end of their life as far as loan terms are concerned, about £23 million is to be expended. In both cases the amounts are likely to fall. The old loans are likely to run out and the prefabricated houses are now reaching the end of their life as far as the loan is concerned.

But the other item—the current council house subsidy—is at present running at the rate of between £15 million and £20 million a year, and those figures are increasing by between £4 million and £5 million a year. Those are figures which we should examine with some care and with a great sense of responsibility. The subsidy increase has meant that every year we shall be spending between £4 million and £5 million extra on subsidies on an amount which is already running at a rate of £15 million a year.

I feel that one of the ways in which we can help in this situation is to popularise the sale of council houses. I know that the Minister of Housing and Local Government has already made it possible for local authorities to sell their houses, but I ask him to do a little bit more than that; I ask him to put over some sales-talk to encourage people to buy houses. In the private enterprise field we do not merely say, "Here is a house"—and leave it at that; we work out attractive terms upon which people can buy the house. The terms are put in an attractive form, giving the sort of deposit required and working out the weekly payments which would be necessary.

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

I think that this is outside the Bill.

Photo of Sir Harmar Nicholls Sir Harmar Nicholls , Peterborough

With respect, Mr. Deputy-Speaker, I think it is relevant. We are making available £1,050 million and I am suggesting that that need not be taken up if the proposition which I am making is taken into consideration by the Government.

If we can encourage those who would normally be council tenants—receiving a subsidy—to purchase the house for themselves without subsidy, that will have a hearing on the interest which has to be paid on subsidies. At present, the Exchequer contribution to each council house subsidy is £26 14s. and the local rate contribution is £8 18s.—a total of £35 a year subsidy. If that is capitalised at 41¼ per cent.—the interest charged today—it means that on each house the Exchequer has committed itself to the extent of £577 and the local rates to the extent of £192.

If people can be encouraged to purchase the house—if they can afford to do so and desire to do so—rather than to become subsidised council house tenants, that means a saving of £769 per house, which is an item which, I believe, would help the Financial Secretary in his other capacity in assisting the Chancellor of the Exchequer to reduce taxation or, at any rate, to prevent it from rising any further.

My suggestion for new council houses is that, apart from merely announcing that they can be bought, the Government should encourage local authorities and potential purchasers to buy them by setting out in attractive terms the conditions upon which they can be bought.

Photo of Mr Charles Pannell Mr Charles Pannell , Leeds West

How does the hon. Gentleman expect the Minister to do that when his own local authority, the borough of Bromley, in Kent, have rejected the selling of council houses—and they are a Conservative-controlled council?

Photo of Sir Harmar Nicholls Sir Harmar Nicholls , Peterborough

That is precisely the point of my argument. I am arguing that many local authorities and many citizens within those local authorities do not understand the possibilities which are open to them under the Minister's present announcement. I am saying that simply to announce that the houses can be bought is not sufficient. There should be some real sales talk behind the announcement, and then we should have more people purchasing their houses and we should save on the interest charges covered in the Bill. That is particularly the case with existing council houses; I believe we should encourage local authorities to sell existing council houses because—

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

I allowed the hon. Gentleman a good deal of latitude to make his point about the saving of £796 per house, but I do not think it should be developed any further.

Photo of Mr William Hall Mr William Hall , Colne Valley

So that those who may come later may know where they are, Mr. Deputy-Speaker, do I understand you to rule out any reference to housing at all? On this side of the House we take the view that much of what the hon. Member for Peterborough (Mr. H. Nicholls) has said should be in order—subject to any Ruling which you may give. If past experience is any guide, this money will be required overwhelmingly for housing. If housing generally is not to be discussed but is to be ruled out of order, it will cabin, crib and confine many of my hon. Friends. Apart from his brief reference to the school-leaving age, the hon. Member for Peterborough has dealt almost exclusively with housing.

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

I stopped him on the subject of the school-leaving age and I felt I ought to stop him about the selling of houses, but the hon. Gentleman explained to me the point he was making—that there would be a saving of £796 a house. I allowed him to develop that to some extent, but I do not think he should continue the point any further.

Photo of Mr Charles Pannell Mr Charles Pannell , Leeds West

On a point of order. I hope I may anticipate your Ruling, Mr. Deputy-Speaker, by assuming that you will not rule out of order those hon. Members who want to deal with the effect of the Public Works Loan Board's policy on rents up and down the country. This is largely a matter of housing, and I suggest that it will have very little reality unless housing comes effectively into the discussion. I criticised the hon. Member for Peterborough (Mr. H. Nicholls) for dealing with the school-leaving age in one connotation, but I should even suggest that loans for the building of schools might come within the terms of discussion.

Photo of Mr Arthur Blenkinsop Mr Arthur Blenkinsop , Newcastle upon Tyne East

Now that this matter has been raised—and I think quite properly raised—it is very important that there should be a full discussion upon it, because we must follow some of the points which have been raised by the hon. Member for Peterborough (Mr. H. Nicholls). I thought it would be agreed that this subject developed naturally under the terms of the Bill.

Photo of Mr Leslie Lever Mr Leslie Lever , Manchester Ardwick

I should like to ask the hon. Gentleman—

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

Dealing with the point of order raised by the hon. Member for Leeds, West (Mr. Pannell), it is difficult enough to deal with points of order as they arise, and to do so in anticipation is quite beyond me.

Photo of Mr Leslie Lever Mr Leslie Lever , Manchester Ardwick

I should like to go into the point with the hon. Member for Peterborough (Mr. H. Nicholls)—

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

I cannot make out whether the hon. Member for Peterborough (Mr. H. Nicholls) has given way or not.

Photo of Sir Harmar Nicholls Sir Harmar Nicholls , Peterborough

I have no doubt that the hon. Member for Ardwick (Mr. L. M. Lever) will have a good opportunity of catching your eye, Mr. Deputy-Speaker.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

On a point of order. I do not want to interrupt the hon. Member for Peterborough (Mr. H. Nicholls), but I am sure you will agree, Mr. Deputy-Speaker, that hon. Members on this side of the House will have at least the same freedom as the hon. Member for Peterborough has had on the topics which he has raised.

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

Most certainly, but I do not think the point should be developed too far. I allowed a certain latitude. I think the point has been made now, and it could be replied to.

Photo of Sir Harmar Nicholls Sir Harmar Nicholls , Peterborough

I submit that 78 per cent. of the money which we are now making available is for housing loans, but I bow to your Ruling, Mr. Deputy-Speaker, and I will not pursue the point.

Photo of Mr Charles Pannell Mr Charles Pannell , Leeds West

The hon. Gentleman has finished.

Photo of Sir Harmar Nicholls Sir Harmar Nicholls , Peterborough

I am quite certain that the mass of local authorities throughout the country will welcome the extra freedom which is likely to be given in their being able to raise loans outside and beyond the Public Works Loan Board, because everybody, whether public or private, prefers to have room for manoeuvre, and this contemplated alteration gives excellent room for manoeuvre. There is no compulsion upon them to go anywhere and there is no compulsion about the interest rate they have to pay. If it is much higher than the Public Works Loan Board rate they can return to that rate.

Finally, I have a request to make to my hon. Friend on the possibility of loans being raised outside the Public Works Loan Board, and it is that he should bear in mind the desirability of local loans. There is no need for everyone to go to the City of London. We have seen local interest in raising loans for local boroughs has been very effective, and I feel that that may be an excellent way of mopping up money which in the past has gone to National Savings, which, in recent years, have been falling off. I do not think there is a great deal of difference between a person lending money to the local authority instead of lending it to National Savings for it to be handed out through the Public Works Loan Board in this form.

I commend the Minister for attempting to give this freedom to local authorities. I am certain that it will not be abused and that they will be able to make good use of the extra freedom which they will be given.

6.10 p.m.

Photo of Mr Arthur Blenkinsop Mr Arthur Blenkinsop , Newcastle upon Tyne East

I am grateful to the hon. Member for Peterborough (Mr. H. Nicholls) for raising the question of housing in relation to this Bill because it does enable us to reply to some of the quite misconceived ideas that apparently both he and some of his hon. Friends possess. Clearly, if there is to be any relevance in discussing the relative costs of housing they must be of houses of the same size, and, particularly, of the same type of construction; and it is clear from what the hon. Member said that we are not, in fact, in discussing houses now being tendered for, discussing houses of the same size at all.

Therefore, when he claims that it is now possible, in spite of the increased cost of money, to get lower tenders, they are, of course, lower tenders for houses which are very much reduced in size, and houses which, while undoubtedly welcomed by people who will welcome any accommodation better than that they have at present, are far from being of the standard we were proud to set ourselves in our Administration, and which we regard, not as wasteful, but as necessary for the needs of our people, not just for the present but for some period of years ahead. Therefore, I think the bulk of his remarks on the issue of housing costs will be irrelevant to the actual details of the Bill we are discussing.

Photo of Sir Harmar Nicholls Sir Harmar Nicholls , Peterborough

The hon. Gentleman must bear in mind that during the time he was in the Government the cost of the same houses went up. They started at £1,100 and finished at about £1,650.

Photo of Mr Arthur Blenkinsop Mr Arthur Blenkinsop , Newcastle upon Tyne East

We insisted upon maintaining the standards that were set, that were not, in our view, extravagant, but necessary. Those standards have now been departed from, and it is not surprising that tender prices have, therefore, fallen, in spite of the increased cost of money that the Administration that the hon. Member supports has imposed wholly unnecessarily upon the community. What the hon. Member is now making quite clear is that, because there is every danger of a further increase in the cost of money, further progressive steps to re- duce the standard of housing will be taken and ought to be taken by this Administration, or that, alternatively, or, perhaps, in addition, fewer houses should be available for renting, and more houses should be sold to reduce the cost upon the local authorities.

He is presenting his own Administration with a dilemma. They have themselves put up the cost of housing by their higher price of money, and to enable people to rent houses at all they have to build down to a much lower standard or else sell the houses and not make provision for the great mass of the people who cannot afford to buy at the sort of rates of interest that are available today.

I want to deal not so much with the past—the hon. Member railed at hon. Members on this side with dealing too much with the past and not enough with the future—I want to deal not so much with the past as with the threats to the future that the policy adumbrated by the Financial Secretary seemed to offer. I, like my right hon. Friend the Member for Battersea, North (Mr. Jay), want to look a little further behind the proposals which have been put before us. I find it quite impossible, of course, now that the Financial Secretary has dealt so fully with the questions arising out of the Expiring Laws Continuance Bill, to avoid discussion of that issue, but the thing that does concern us so very closely is that—

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

I think the hon. Gentleman ought to ask the leave of the House to speak, because he did second the Motion, earlier, and can speak again only by leave of the House.

Photo of Mr Arthur Blenkinsop Mr Arthur Blenkinsop , Newcastle upon Tyne East

No. The Motion was to adjourn the debate. I formally seconded the Motion to adjourn the debate. I was not speaking at all to these proposals.

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

The hon. Gentleman seconded the Motion.

Photo of Mr Arthur Blenkinsop Mr Arthur Blenkinsop , Newcastle upon Tyne East

It was purely formal, without any speech at all, but I am prepared to submit to your Ruling, Mr. Deputy-Speaker, and ask the leave of the House, although that other intervention was a purely formal intervention.

To go back to the point at issue on these Bills, the Financial Secretary said, "It must not he thought that we intend to exclude authorities from the Public Works Loan Board while they are in this situation." I understood he was referring to the situation of the local authorities who intend to raise money for purposes that have been sanctioned either by the late Administration or by the present Administration.

We do need to call for some elucidation of those words. He said, "While the local authorities are in this situation." I think we can take it from that that this proposal of the Government for the open market technique—that is to say, to enable local authorities to go on to the open market without denying them the use of the Public Works Loan Board—is a purely temporary step, and that they are considering further measures that the Government will take later on.

I take it that that can be perfectly fairly read into the remarks the Financial Secretary made to us. He was making, he said to us, a considered statement, and, therefore, we have to examine those words with exceptional precision, and I take it, therefore—unless he cares to intervene now to say that I am wrong in this assumption—I take it we can assume that the policy he has stated is merely a first step, and that the Government are considering further steps with regard to the financing of local government borrowing that may follow later.

Photo of Mr John Boyd-Carpenter Mr John Boyd-Carpenter , Kingston upon Thames

I do not wish to seem discourteous to the hon. Gentleman, but I think it is a little difficult to continue a debate on the basis, "If you do not intervene my meaning of what you said must be binding on you." However, I have taken note of the hon. Gentleman's point, and I am quite prepared to reply to it at a later stage.

Photo of Mr Arthur Blenkinsop Mr Arthur Blenkinsop , Newcastle upon Tyne East

I am grateful to the hon. Gentleman for offering an answer at a later time, but this merely follows on the points that were mentioned by my right hon. Friend with regard to comments in the financial Press about the proposals of the Government. I should like to quote from certain comments that have not yet been mentioned in the House, which seem to suggest that these financial circles, at least, expect that the justification for the measures that the Government have taken is that they are merely the initiation of a new policy. For example, the "Financial Times," in an editorial on 10th November, said: The first step has been taken towards bringing housing under the compulsion of the capital market along with all other schemes of capital development. I am sorry that the Parliamentary Secretary to the Ministry of Housing and Local Government is not here at the moment, because I have no doubt that he or his Minister would have some comment to make about that, because I presume they would not be satisfied with accepting this view that housing is to be brought under the compulsion of the capital market, because they have prided themselves that, so far, they have been able to keep the housing programme entirely outside any restrictions that have fallen elsewhere in the general capital field.

Photo of Mr Charles Pannell Mr Charles Pannell , Leeds West

Only by means of subsidies.

Photo of Mr Arthur Blenkinsop Mr Arthur Blenkinsop , Newcastle upon Tyne East

By means of subsidies and by means of cutting other capital development much more severely.

It is of very great importance that we should follow through these comments, because in discussing the Public Works Loans Bill and the validity or otherwise of the sums that are referred to in the Public Works Loans Bill it is very important indeed to know precisely just what the future financial policy of the Government is—and here we are referring, I hope the hon. Member for Peterborough will understand, to the future intentions of the policy, and he will welcome, I am sure, the attention that we are paying to that side of the Government's operations.

The "Financial Times," again on 10th November, said: The speed of transfer"— referring to the transfer of local authority borrowing to the open market— will depend upon the rates of interest to be charged on Public Works Loan Board loans, and this is, no doubt, the instrument the Treasury will use to control the diversion of local government borrowing into new channels. What could be clearer than that?

I am sorry that the Minister of State for Economic Affairs, whom we always welcome very much on to the Government Front Bench, is not here at the moment, because I had very much hoped that he would have taken the opportunity of intervening in this debate, as he did so usefully a year ago. I apologise for that brief reference to the past, but a year ago we managed to encourage him to take part in the debate in a very useful way, and I am sure it is important that we should have his comment on whether this statement which has gone out in the "Financial Times," and is clearly being referred to in other papers as being the obvious outline of the opinion and views of the Government, is correct or not.

I am not sure that we shall be wholly satisfied with any reply which the Financial Secretary might feel able to give, because we fear that there may be certain very strong differences of opinion among Her Majesty's Government on this issue, particularly as the Minister of State for Economic Affairs made so very clear his views, and those of the economic advisers to the Government, that local government borrowing had to be cut substantially.

As he made that statement a year ago it is important that he should be invited to come back on to the Government Bench to say whether or not in his view this statement of policy that I have just read out from the "Financial Times" is one which Her Majesty's Government now intend to follow, because there is no doubt at all that that question will determine very much, not only our attitude in this House to these measures but, what is perhaps even more important, the attitude of local authorities generally and the attitude of ratepayers throughout the country.

I would point out, for example, that in further articles, as recently as today, 12th November, there is this comment in the "Financial Times": Two-thirds of the capital spending programme represents funds allocated to the Public Works Loan Board for re-lending to local authorities for financing housing and other projects. So a first essential of any attempt to lighten the capital account side of the budget would be to force or encourage the local authorities to secure their needs elsewhere. That is a really enlightening remark, and we must put this direct question to the Government: Have they any intention of forcing or taking further steps to encourage local authorities to secure their needs outside the Public Works Loan Board?

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Kidderminster

Would the hon. Gentleman tell the House why he thinks that it is such a bad policy to encourage a local authority to go direct to the money market, in consideration of the fact that that local authority might in certain market conditions get better borrowing terms on the open money market than it could secure from the Public Works Loan Board?

Photo of Mr Arthur Blenkinsop Mr Arthur Blenkinsop , Newcastle upon Tyne East

There are two issues in reply to that. First of all, there is the issue referred to by Sir John Anderson, in 1945, when a relevant Bill was introduced into this House, when he dealt with the dangers to the floating of loans and the dangers to the whole economic operation of the Government if there were to be no effective control of the operations. Part of the whole reason for the Public Works Loan Board is, not only the advantage of having relatively low rates of interest, but also the advantage of being able to canalise through a central authority and to examine in a proper way the validity and value of those operations.

Photo of Sir Geoffrey Hutchinson Sir Geoffrey Hutchinson , Ilford North

Surely the local authorities have to obtain sanction for the loans from the Minister before they can incur any liability at all?

Photo of Mr Arthur Blenkinsop Mr Arthur Blenkinsop , Newcastle upon Tyne East

That is so, and that was true at the time Sir John Anderson made his valuable speech in introducing these proposals. I am quoting, of course, the most authoritative views on this subject that are available, and views which were accepted by local authorities at the time. I do not deny for a moment that certain local authorities, particularly the larger local authorities, may from time to time find it possible to float loans on lower terms on the open market, and that is very attractive to them. Of course it is.

At the same time, it is equally true that very large numbers of smaller authorities, if they were obliged in any way to go on to the open market, would find that they could not raise any money at all and the whole of their operations would very likely be destroyed. It is obvious from the comments in the financial Press, and from comments made by hon. Members opposite, that the whole object of trying to force local authorities on to the open market is to prevent the local authorities raising the necessary money.

Photo of Mr Arthur Blenkinsop Mr Arthur Blenkinsop , Newcastle upon Tyne East

Certainly. It is to ensure that there should be further restrictions upon local authority operations. That is obvious from the whole tenor and tendency of Her Majesty's Government's proposals. Many of their most responsible Ministers have argued for a severe cutting of local government expenditure. They have not done it; they have not been able to do so so far because the increased charges, as was so well explained by my right hon. Friend, have put up their costs and their expenditure. But it is quite clear that they are to make further attempts as an intermediary stage.

I repeat the question I put to the Financial Secretary, and I hope that he will secure the backing and appearance of the Minister of State for Economic Affairs on this matter. Is it the intention of Her Majesty's Government at some later time to force or take further measures to encourage local authorities to secure their needs outside of the Public Works Loan Board? I would just make this further comment from the "Financial Times." They go on to say: A step in this direction"— that is to say, in the direction of forcing and encouraging local authorities into the open market; something which the hon. Member for Kidderminster (Mr. Nabarro) welcomes but which local authorities generally do not welcome—

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Kidderminster

I am sure the hon. Gentleman would not wish to misquote me. I did not agree with him about forcing local authorities. Not forcing.

Photo of Mr Arthur Blenkinsop Mr Arthur Blenkinsop , Newcastle upon Tyne East

I see. I take it, therefore, that the hon. Gentleman does welcome any further steps to encourage.

Photo of Mr Arthur Blenkinsop Mr Arthur Blenkinsop , Newcastle upon Tyne East

And, of course, the hon. Gentleman would agree, I am sure, that one can get to a position in which it is very difficult to see whether one is merely encouraging or whether one is enforcing. Such measures of encouragement could be used that they become almost compulsion on local authorities if they want to secure their loan at all. The "Financial Times" goes on to say: A step in this direction has been taken with the decision not to renew the 1945 ruling compelling local authorities to obtain their capital needs from Government sources. But this is clearly nothing more than a first move of little practical significance. They go on to say that it is of importance merely because it shows the direction in which the Government are moving, and suggests that there may be two further steps the Government may take.

We are still in the future, but I am afraid the hon. Member for Peterborough (Mr. H. Nicholls) has now gone, so I cannot ask for his further support. They say that either the Government may take steps to ensure that the present inducement to local authorities to borrow from the Public Works Loan Board might disappear—that is one way of encouragement; that is the next thing to inducement—or it may be a preliminary to the pre-war practice by which the Public Works Loan Board obtained their funds from the market and not from the taxpayer.

We certainly want to have information on these issues. I must say that I think it was a little naive of the Financial Secretary, when he made his speech, to think that this was a relatively simple matter, and that there was nothing behind it; that he appeared before us almost transparent with good will and there could be nothing to which we could possibly take exception. Far from that being true, we on this side must examine these proposals with great care and with great suspicion in view, not only of the comments I have referred to from the Press which supports the Government, and which is pressing them forward further along the line, but also because of the encouragement that these remarks have already received from hon. Members opposite.

I therefore hope that these questions will receive the full and careful attention which they ought to receive by Members on both sides of the House, so that the local authorities as a whole will be informed that there is more behind this than at first meets the eye.

6.30 p.m.

Photo of Sir Geoffrey Hutchinson Sir Geoffrey Hutchinson , Ilford North

The hon. Gentleman the Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop) found little, I think, to complain of in this Bill or in the speech of my hon. Friend who introduced it. His complaints were made more upon the anticipation that something might happen which we have been told is not going to happen, at any rate for some time, than upon a complaint of anything that was to be found in this Bill.

Contrary to what has been said on a good many occasions this afternoon, I think that the action which the Government have decided to take will be welcomed by the local authorities. It marks a further step towards re-establishing in some measure the loss of responsibility and independence which they have suffered in recent years. I was never one of those who believed that the artificially low rate of interest which local authorities enjoyed after the war was a good thing. I never thought that. It amounted to a concealed subsidy. There is much to be said for a subsidy but there is nothing to be said for a concealed subsidy. I always took the view that it was much better that the contribution which the Government make to the services of local authorities should be made openly in the form of a subsidy, or a grant, rather than in this indirect way of charging them what was, after all, a very unreal rate of interest.

As has been said earlier this afternoon, not all local authorities went to the capital market for their requirements. Indeed, I think that I am right in saying that all the smaller authorities borrowed from the Commissioners, as they will continue to borrow from the Commissioners in exactly the same way under the proposals of Her Majesty's Government. But there is this qualification. Many of the smaller local authorities, particularly in the north of England, borrow small sums from their ratepayers on the security of rates. In Lancashire and Yorkshire that was a very popular way of raising money. I think that it was a good way of raising money. It was an encouragement to small savers.

Photo of Mr William Hall Mr William Hall , Colne Valley

Surely the hon. and learned Gentleman is not telling the House that such local authorities cannot do that under the 1945 Act? Of course they can. They can borrow in anticipation of revenue to come, which is what the hon. and learned Gentleman is now talking about.

Photo of Sir Geoffrey Hutchinson Sir Geoffrey Hutchinson , Ilford North

The right hon. Gentleman says that it is possible for them to borrow in the way I have been describing under the 1945 Act. I am surprised that the right hon. Gentleman should put that point because he must, I think, be aware of the fact that their powers to borrow on the security of the rates was limited to the amount of such borrowings outstanding when the 1945 Act was passed; that is to say, if they paid off one of these small mortgages on their rates, they were at liberty to borrow the same amount from another source. He will appreciate what the Government are now doing is something quite different. They are putting the authorities back into the situation in which they were before the 1945 Act was passed, and the restriction on their right to borrow these small sums locally on the security of their rates will now be fully restored. It will, I think, be an extremely valuable return to the liberty which the local authorities used to enjoy and which was taken from them.

Photo of Mr Arthur Blenkinsop Mr Arthur Blenkinsop , Newcastle upon Tyne East

The hon. and learned Gentleman said a little earlier that he regarded this as a valuable first step. That is the point which I have been trying to make. Will he outline what he feels to be the further steps which the Government ought to take?

Photo of Sir Geoffrey Hutchinson Sir Geoffrey Hutchinson , Ilford North

I am coming to that later. Unlike the hon. Member for Newcastle-upon-Tyne, East, I would submit to the House that it would be a good thing for the local authorities and for the Treasury if we could get the big local authorities back to the capital market and off the Public Works Loan Commission. It would be a good thing, I think, for the ratepayers, because it would no longer be necessary for my right hon. Friend the Chancellor of the Exchequer to budget for a surplus below the line. So we start with what would be a substantial relief of the Budget.

It would be a good thing, too, for the local authorities if they could get back to the capital market. The hon. Gentleman the Member for Newcastle-upon-Tyne, East said something about interest rates, but in fact the securities of the local authorities which are now on the market are standing at a lower interest rate than the local authorities are being charged by the Public Works Loan Commission.

Photo of Mr Charles Pannell Mr Charles Pannell , Leeds West

Will the hon. and learned Gentleman say that at the present time local authorities can borrow on long-term loans cheaper than the 4¼ per cent. asked for by the Public Works Loan Board?

Photo of Sir Geoffrey Hutchinson Sir Geoffrey Hutchinson , Ilford North

What I was saying was not that. I was saying that local authorities' securities on the Stock Market today are standing at a more favourable interest rate than the interest rate offered by the Commissioners. London County Council's 3½ per cent. stock is standing today at a gross yield rate of just over 4 per cent. against 4¼ per cent. which the London County Council are having to pay for new money. I agree that we cannot press this point too far because there are the expenses of issue and the Stamp Duty, which hon. Members opposite doubled when they were in office, and there are other factors which make borrowing a more expensive proposition than it used to be. I would not press that point too far, but that is actually the fact.

If the hon. Gentleman the Member for Leeds, West (Mr. Pannell) would look at the prices at which local authorities' securities are standing on the Stock Exchange today, he will see that in almost every case the yield basis is more favourable to the local authorities than the interest rates they have to pay to the Commissioners. That is how their credit stands today on the Stock Exchange. Surely that is some encouragement to the local authorities to go back again to the Stock Exchange and perhaps get their money a little cheaper than they could get it from the Commissioners.

Photo of Mr Charles Pannell Mr Charles Pannell , Leeds West

That is not the test. The test is at what rate the local authorities can raise money for future borrowings. That is what we are talking about. This is a Bill to provide the finances for local authorities, presumably in the coming year, and the hon. and learned Gentleman had better address himself to the question whether local authorities in the open market, not for short-term but for long-term borrowing, can better the 4¼ per cent, of the Public Works Loan Board. That is the issue, not ancient history of what old securities are fetching.

Photo of Mr William Hall Mr William Hall , Colne Valley

The hon. and learned Gentleman is patient, so may I also ask him to answer the following question? What effect will these local authorities—all going into the market, all at the same time, or quite near to each other—have on interest rates. What will be the effect on the rates when they are all scrambling for the funds which the Stock Exchange has available?

Photo of Sir Geoffrey Hutchinson Sir Geoffrey Hutchinson , Ilford North

I am obliged to the right hon. Gentleman for his inter- vention, because he has really answered the previous question. Now, if I may answer the right hon. Gentleman, all the local authorities are not going into the market at the same time. That will not happen. Unless the local authorities can get a more satisfactory interest rate in the market they will go to the Public Works Loan Commissioners and nothing my hon. Friend is going to do will prevent that.

Photo of Major Geoffrey Bing Major Geoffrey Bing , Hornchurch

The hon. and learned Gentleman says that nothing his hon. Friend could do would affect that, but there is one thing his hon. Friend could do which would affect it very much. Will the hon. and learned Gentleman secure from his hon. Friend on the Front Bench an undertaking that the interest rates chargeable by the Public Works Loan Board will not be put up, because that would force them on to the market.

Photo of Sir Geoffrey Hutchinson Sir Geoffrey Hutchinson , Ilford North

If the hon. and learned Gentleman would listen to me carefully and not be so ready to intervene, he might have heard me say that what my hon. Friend is doing now will not prevent anybody from going to the Commissioners. That is the answer to the point he has just been putting to me.

Photo of Mr William Hall Mr William Hall , Colne Valley

It is obvious from what the Financial Secretary said that nearly £950 million was exhausted in advances and commitments last year, and if now much of that is to be raised on the open market, obviously it must affect the rates.

Photo of Sir Geoffrey Hutchinson Sir Geoffrey Hutchinson , Ilford North

I think I have answered that point and I must get on with my speech. I was about to say that it would not only be to the advantage of the Treasury that the major local authorities should meet their requirements from the capital market, but that it would be to the advantage of the local authorities themselves.

What is happening today? Local authorities are paying an interest rate of 4¼ per cent. on a loan which runs for 60 years. I do not press 60 years too hard, because, of course, the repayments are based on the annuity principle. But it is fair to say that they are borrowing at 4¼ per cent. for, let us say, 30 years because that is probably more like the effective length of the loan. Money may be much cheaper in the course of the next 30 years than it is at present. This Government may overcome the inflationary tendencies which hon. and right hon. Gentlemen on the other side of the Chamber found it so difficult to handle when they were responsible. There is some indication that that is going to happen.

Many local authorities are not willing to commit themselves, if they have an alternative, to raising a loan at 4¼ per cent. for 30 years. They would prefer to go into the market for a shorter term and take their chance that, when the period for repayment comes, it will be possible to refund the loan on a more favourable basis. So if we can get the big local authorities into the capital market, I say that it would be an advantage both for the Treasury and for the local authorities.

Photo of Sir Eric Fletcher Sir Eric Fletcher , Islington East

I am interested in what the hon. and learned Gentleman is saying, but is he not assuming that the Public Works Loan Board would not lend for less than the full amount for which loan sanction had been given? Will he say whether he would be in favour of the Public Works Loan Board having power to lend to such an authority for a shorter period if the local authority wanted to do that?

Photo of Sir Geoffrey Hutchinson Sir Geoffrey Hutchinson , Ilford North

The hon. Gentleman has wide experience in these matters. He and I were members of the Finance Committee of the London County Council together. He was the chairman, I was the leader of the opposition. The hon. Gentleman knows as well as I know that the Commissioners will loan for a much shorter period than 30 or 60 years. They lend for 15 years. But housing finance is not based on short periods but on a period of 60 years. If local authorities ask to borrow for a shorter period than 60 years for housing purposes, the answer is, no.

Of course the time may come when my right hon. Friend the Chancellor of the Exchequer will have conquered the bogy of inflation, as I think he will one day, and when the Commissioners will be willing to lend again at a lower rate of interest. But that does not mean that outstanding loans can be refloated. The local authority is committed for the rest of the life of the loan to the rate of interest which it agreed to pay in the beginning.

The hon. Gentleman the Member for Newcastle-upon-Tyne, East spoke of the advantage of local authority borrowings being made through the Commissioners. He had some experience when he was at the Ministry of Health. It is not the case that local authorities find it convenient to borrow through the Commissioners. The procedure of the Commissioners is an inflexible one. Each advance must be related to a specific loan sanction and must be within the terms of that loan sanction. That involves the local authority in a great deal of unnecessary administrative work, and the local authorities would much prefer, if they could, to go to the market and raise their loans without having to appropriate every part of the loan to the particular loan sanction which has authorised the expenditure which they wish to incur.

Photo of Mr James Callaghan Mr James Callaghan , Cardiff South East

Would it not remove the grievance if the Public Works Loan Board were to make loans for periods of less than 30 or 60 years on housing and educational projects? Also, is it not the case that there is no legal bar to the Public Works Loan Board making the loans and that it is merely that the Treasury have insisted that they should not do so?

Photo of Sir Geoffrey Hutchinson Sir Geoffrey Hutchinson , Ilford North

I should not like to commit myself as to whether there is any legal obstacle or not, but I can tell the hon. Gentleman that they have never been willing to do it. No doubt, as he says, that is because the Treasury have not been willing that they should do so. The Treasury have not been willing because they themselves have to borrow and, naturally, they want to cover the rate of interest they have to pay before they lend it out again to the local authorities.

In conclusion, may I make one or two observations to my hon. Friend the Financial Secretary? If he desires to facilitate the process of getting the major local authorities back on to the capital market, I would suggest that he should examine the effect of the present arrangements with regard to Stamp Duty. Hon. Members opposite, when they were responsible, doubled the Stamp Duty, and that has meant a very considerable addition to the expenses involved on the local authorities in the management of their loans. Many of the major local authorities pay the Stamp Duty on transfers to their loans. Stamp Duty is now 4s. per cent. It is exactly double what it was when the Local Authorities Loans Act, 1945, was passed, and it represents a very considerable burden in the cost of managing a loan.

Photo of Sir Geoffrey Hutchinson Sir Geoffrey Hutchinson , Ilford North

I could tell the hon. Member for some authorities, but I do not think that would help him. I am quite certain, however, that when the hon. Member sits down and calculates the cost of Stamp Duty at the rate of 4s. per cent. on a substantial transfer of local authority stock he will appreciate it is a large sum of money.

Photo of Mr Leslie Lever Mr Leslie Lever , Manchester Ardwick

Has the hon. and learned Gentleman any information which will give the House any idea of how immense is the burden involved?

Photo of Sir Geoffrey Hutchinson Sir Geoffrey Hutchinson , Ilford North

It depends on the number of transfers.

Photo of Mr Leslie Lever Mr Leslie Lever , Manchester Ardwick

We know that, but I want to know how much is involved.

Photo of Sir Geoffrey Hutchinson Sir Geoffrey Hutchinson , Ilford North

I am not at all sure that the hon. Member appreciated that before he raised the subject. His observation conveyed to me that he did not.

Photo of Sir Geoffrey Hutchinson Sir Geoffrey Hutchinson , Ilford North

I cannot tell the hon. Member how many transfers there are every year in the transactions that take place in local authorities' stocks. What I can tell him is that the burden of this particular item is now double what it was before the Government which he supported doubled the Stamp Duty.

I hope I shall be allowed now to conclude my speech, because I am now addressing myself to the Financial Secretary. If he desires to facilitate the process of persuading the larger local authorities to go into the capital market. I submit he should review the conditions of payment of Stamp Duty on their transfers of stock. If my hon. Friend were able to see his way to remit the payment of Stamp Duty altogether on transfers of new stocks, it would mean that the cost of the management of loans through the Bank of England would probably be less than the actual cost of the management of loans through the Commissioners.

There is this further advantage from the standpoint of the Treasury. My hon. Friend would be losing nothing, because today he is not collecting Stamp Duty on transfers of new local authorities' loans. He would really be giving nothing away. If the Treasury desires to be generous, the most generous attitude they could strike is the attitude of generosity when they are, in fact, sacrificing nothing. I commend that form of generosity to my hon. Friend, and I hope he will be able to give us some assurance that the local authorities can look forward to some remission of the burdens which were cast upon them during the late Administration.

6.54 p.m.

Photo of Sir Eric Fletcher Sir Eric Fletcher , Islington East

The hon. and learned Gentleman the Member for Ilford, North (Sir G. Hutchinson) has made a very interesting speech, with some aspects of which I am anxious to deal. Therefore, I am glad to have this opportunity of following him.

I could not quite follow the relevance to this particular Bill of the hon. and learned Gentleman's suggestion that local authorities should be relieved of having to pay Stamp Duty on the transfer of their stocks. Nevertheless, I think it is a good suggestion and it is one which I should like to support. But a similar suggestion, which is far more relevant to this Bill, would be that local authorities should be relieved from having to pay Stamp Duty on the mortgages which they execute with the Public Works Loan Board in respect of their loans.

There is no necessity for that. Indeed, I am not sure there is any necessity for a mortgage deed in each case. I feel that there could be a simple legislative enactment to give statutory effect to the proposal that a document recording a loan from the Public Works Loan Board should be deemed to have the effect of mortgaging by way of security the assets of the local authority and that would be a charge in favour of the Public Works Loan Board. That would not merely save Stamp Duty, but a great deal of administrative work which is now proposed in preparing a mortgage for each separate transaction.

There is no doubt that when the news broke, a few days ago, that the Treasury had decided not to renew Section 1 of the Act of 1945, a good deal of mystification and consternation spread among some local authorities and was reflected in the financial Press. What has surprised and disappointed me is that the Financial Secretary's statement has done nothing, in my view, to lessen the mystification that has been caused. I think perhaps it is fair to say that the Financial Secretary, in making a prepared statement towards the end of his speech, which, I gather, was calculated to give a certain amount of reassurance to local authorities, might perhaps have been put out by the interjections made at an earlier stage. If that is so, I hope he will clear the matter up when he replies.

The history of this matter during the last few months is most surprising. It is no secret in local government circles—and many Members of the House are familiar with the facts—that there have been discussions about this Bill between the local authorities concerned and the Treasury in the last few months. Comparatively recently local authorities were told that Section 1 was to be continued for another year and then made permanent. Since then there has been a change of mind. It is now to be abolished, and, according to the Financial Secretary, local authorities are to be given their "freedom."

I am afraid that a great deal of confusion has entered into this debate because, of course, the needs of local authorities vary considerably according to whether they are large municipalities, like the London County Council or the Corporations of Manchester, Birmingham or Liverpool; or whether they are small local authorities. It is perfectly true that for some time now some of the larger local authorities have been urging that they should be released from the restrictions which Section 1 imposed, and to the that extent I myself welcome the fact that, in a sense, the removal of Section 1 gives a certain measure of freedom.

Photo of Sir Eric Fletcher Sir Eric Fletcher , Islington East

The restrictions are removed from all local authorities. What I want to know—

Photo of Captain James Duncan Captain James Duncan , South Angus

The hon. Gentleman was saying that some of the larger local authorities preferred these restrictions to go, and I was asking whether London was one of them.

Photo of Sir Eric Fletcher Sir Eric Fletcher , Islington East

I am no longer a member of the London County Council, so I am not qualified to speak for that body.

I ought to have mentioned that I have an interest in this matter, as the Financial Secretary recognised, in that I am a Commissioner of the Public Works Loan Board, the only one in the House at the present time. I would add that Section 4 of the Public Works Loans Act, under which I was appointed by my right hon. Friend the Member for Bishop Auckland (Mr. Dalton), who has just come into the House, precludes Commissioners from receiving any salary, fee or emolument in respect of their office as Commissioners. I mention that fact because there is a good deal of misconception, not only among the public but in local government circles and among hon. Members of this House, as to the precise functions of the Public Works Loan Commissioners. I was very interested in the interchange that took place a moment ago as to whether or not the Board could lend for terms less than the full period of time for which loan sanction has been granted. That is a matter which deserves investigation.

The hon. and learned Member for Ilford, North (Sir G. Hutchinson) pointed out that there are local authorities who used to borrow in their own localities before 1945. That was particularly the case in Lancashire and Yorkshire. Opinions may legitimately differ as to whether that is a good thing and whether that right should be restored, and if so, the extent to which it should be restored. I would remind the House that at one end of the scale there are very large authorities, who were always rather reluctant to go to the Public Works Loan Board, whereas at the other end there are a very large number of small local authorities—rural district councils, urban district councils, drainage boards and even parish councils, for example, who also come to the Public Works Loan Board.

I do not know whether the House realises that of the 30,000 applications for loans considered by the Board during the current year more than 3,000 were for amounts of £500 or less. I do not think that anyone would dispute that if small local authorities desirous of borrowing £500 or less for some local purpose can get the money from their own localities it is very good that they should be able to do it rather than have to adopt the machinery of the Public Works Loan Board. Another reason why it is good is that very often they want to borrow what is called a "maturity loan," not paying back by instalments over 30, 40, or 50 years but borrowing for 10 years or more and then repaying in full. They should have the right to do that.

It may well be argued, and I would be prepared to argue, that the Public Works Loan Board ought also to have the right to lend money by way of maturity loans. Is it generally recognised that the Public Works Loan Board cannot lend a maturity loan or a sum of money for a fixed period? It can only lend on the terms that the principal together with interest is paid by half-annual instalments. That may be a convenient or desirable form for some loans to take but I see no reason why local authorities should be compelled to borrow in that fashion. If they are to have freedom from the inhibitions at present imposed by Section 1, it is worth while for the Treasury to consider whether there is any reason why the Public Works Loan Board should not be able to grant loans for fixed terms on a maturity basis.

Photo of Sir Geoffrey Hutchinson Sir Geoffrey Hutchinson , Ilford North

What advantage does the hon. Gentleman see in that suggestion? If local authorities are free to obtain money on those terms from private sources what advantage would it be for the Public Works Loan Commissioners to lend on the same basis?

Photo of Sir Eric Fletcher Sir Eric Fletcher , Islington East

One obvious answer is that there might be an advantage in the interest rates. All local authorities had the great advantage, when my right hon. Friend the Member for Bishop Auckland was Chancellor, of being able to borrow cheap money from the Public Works Loan Board. The interest is fixed. That is one obvious advantage. The whole position has changed for local authorities since interest rates went up. Until a year ago most local authorities felt that there were substantial advantages in being able to get their loans from the Public Works Loan Board, but the position is not necessarily the same now that interest rates have gone up.

There are other aspects of the matter. With interest rates high, compared to what they were under the beneficent régime of my right hon. Friend, some local authorities do not want to borrow at 4¼ per cent. for 60 years because they will be compelled to go on paying that interest at that rate for all that time. Instead of borrowing, say, £200,000 or £500,000, on those terms, some of them would much prefer to borrow the amount required for, say, 20 years on a maturity basis, and chance their arm, having carried out a proper system of amortisation, that when the loan becomes due for repayment of being able to borrow for the residue of the permitted period at a lower rate of interest.

Photo of Captain James Duncan Captain James Duncan , South Angus

What effect would that have upon housing loans?

Photo of Sir Eric Fletcher Sir Eric Fletcher , Islington East

I must ask the protection of the Chair, because that question is irrelevant to the thread of my argument; I shall try to come back to it.

I am trying to present a serious answer to the Financial Secretary and to the hon. and learned Member for Ilford, North (Sir G. Hutchinson). The occupants of the Chair have been very tolerant about the ambit of the debate. I hope that no one will criticise me if I try to keep as strictly as possible to what I think is the essential principle of this matter, and that is the terms on which local authorities will be able to borrow in the future.

I want to take this opportunity of clearing up with the Financial Secretary the functions of the Public Works Loan Board. I was saying a moment ago that there is a great deal of misunderstanding in the country about this matter. During the Recess, I was addressing a meeting at Folkestone, the annual meeting of the Association of Municipal Corporations, who had kindly invited me to address them on matters relating to financial control and the independence of local government. The chairman, in introducing me, made certain flattering remarks which I did not deserve and then went on, incidentally, to say that I was a member of the Public Works Loan Board. To my surprise there were something like howls of derision.

Curious though it may seem, the Public Works Loan Board has come to be regarded in some local government quarters as composed of people who prevent local authorities from getting the capital they need when they want to borrow. The reverse is the case. Incidentally, I was surprised to see that that misapprehension was repeated in such a usually responsible newspaper as the "Financial Times," which on Monday, 10th November, said that local authorities would have to go to the Public Works Loan Board at rates of interest dictated by the Treasury and for periods dictated by the Board.

The Public Works Loan Board has no powers of dictation and has very little discretion at all in these matters. It would be unfortunate if the local authorities or the public should get the impression that the Public Works Loan Board is a body independent of the Treasury or exercising any discretionary powers. The Reports of the Public Works Loan Board for the last two or three years make the position abundantly plain. On page 42 of the Board's Report for 1951–52 we say: No applications were refused during the year"— there were 19,336 applications— … but the Board consulted the Treasury before approving loans in a few cases where they considered that high local rates or other factors adversely affect the security. Most well-informed people realise that since 1945 the effect of Section 1 of the 1945 Act has been to prohibit local authorities, except in exceptional circumstances, borrowing otherwise than from the Board. The corollary of that prohibition has been that any local authority without exception has been able to borrow any authorised capital it wants from the Board at any time.

The procedure laid down is that when a local authority wants to borrow it has to obtain, first, sanction from the sponsoring authority, for example, the Ministry of Housing and Local Government or the Ministry of Education, and it has to obtain permission from the Treasury under the Control of Borrowing Order, and it then almost automatically gets the money from the Public Works Loan Board. It has been pointed out in the House on previous occasions that to a large extent the Public Works Loan Board has in recent years merely been a rubber stamp in the sense that it has not been able to refuse any applications for capital.

I want to know, some of my colleagues will want to know and all local authorities will want to know to what extent that position will change under the new dispensation which the Financial Secretary has announced today. I thought he was very ambiguous. He dealt with the subject in two passages of his speech which were inconsistent. He said that the Public Works Loan Board "will, as before, lend to local authorities," and then, later, he said that local authorities would have "access to the Public Works Loan Board." Which does he mean?

My question is: Now that the Treasury are giving the local authorities this measure of freedom but are still providing funds to the Public Works Loan Board for the benefit of local authorities who still want to adopt the old procedure, is it or is not intended that, as in the last five years, any local authority which gets loan sanction from the Treasury and the other Government Departments concerned can then automatically get the capital it wants from the Public Works Loan Board?

If that is the intention, it is difficult to see whether the Public Works Loan Board is very much more than a façade, but if it is not the intention, will the Financial Secretary say whether it is intended that the Public Works Loan Board is to have discretion as to whether it should lend or whether it should not, and are any directions to be laid down as to how it should exercise its discretion?

What we are trying to probe is an aspect of the finance policy of the Government in their dealings with local authorities. There is no doubt whatever how the financial Press has construed the new policy. The "Observer," on its front page on Sunday, had the headline: Big policy change in local loans. The newspaper assumed that the Government apparently intends that capital investment by local authorities will have to be trimmed to the same anti-inflationary whims of dearer money that affect anyone else.

Photo of Sir Eric Fletcher Sir Eric Fletcher , Islington East

I am prepared to accept the view that that is a statement of the Government's intentions—let us assume that it is—but I also want to know how it will be carried out. If, as the "Observer" and other newspapers assume, no doubt rightly, according to the hon. Member for Kidderminster (Mr. Nabarro), that that is the Government's intention, I hope that in common decency and honesty the Government will take full responsibility and not try to hide behind the Public Works Loan Board.

What does the "News Chronicle" say on 11th November? Its heading is "Local councils need disciplining." Is that a true interpretation of Government policy? If so, is this the method by which the Government intend to discipline them?

Photo of Sir Geoffrey Hutchinson Sir Geoffrey Hutchinson , Ilford North

Surely the hon. Gentleman does not expect to find statements of Government policy in the "News Chronicle"?

Photo of Sir Eric Fletcher Sir Eric Fletcher , Islington East

Our difficulty is that we cannot get a statement of the Government's financial policy anywhere. We are trying to find out now what the policy is. I am merely using these extracts as a convenient method of asking the Government whether this is Government policy, or, if that is not the right explanation, what is the purpose of the change in the system which has been operating for the last five years.

The Financial Secretary was not very enlightening about it. He said, in a rather vague sentence, that the Government's intentions had been communicated to local authorities. Why should they not be communicated to this House? Here and now I ask the Financial Secretary to produce and read to the House exactly what has been told to local authorities. I formally ask that before the debate goes very much further one of his colleagues should read for the benefit of the House a precise statement of what has been said by the Government to local authorities.

That would be the answer to the hon. and learned Member for Ilford, North (Sir G. Hutchinson) and to the hon. Member for Kidderminster. It is because we have not been given this information that we have to quote what is said in the "Observer," the "Financial Times" and the "News Chronicle." I much prefer to have it from the Government.

Photo of Mr James McInnes Mr James McInnes , Glasgow Central

But we shall not get it.

Photo of Sir Eric Fletcher Sir Eric Fletcher , Islington East

One of my hon. Friends says that we shall not get it, but I very much doubt whether the Government will get the Second Reading of the Bill unless we do get that information, because, otherwise, the Government are not entitled to get the Second Reading. In the absence of this information, to which we are clearly entitled, I ought to let the House know as fully as I can what I have been able to gather about the reactions of local authority representatives to this statement of a change of Government policy.

I do not think there is any doubt that some of the local authorities welcome the measure of freedom that has been given to them, but that will not satisfy them all. What they particularly want is an assurance that local authorities who still desire, as in the past, to obtain their capital funds for authorised capital expenditure from the Public Works Loan Board, will be able to get it unequivocally and without exception, as in the past. Can we have an assurance to that effect, and can we be told that that assurance will continue in operation until the Financial Secretary comes back to the House and says that he wants to withdraw or change it?

Secondly, local authorities would like a good deal more enlightenment as to the kind of terms upon which those of them who choose to go to the stock market for loans upon a maturity basis will be able to do so. Of course, local authorities realise that the cost of raising a loan in the City is in itself a costly business. The inherent expense involved in the operation is something which does not arise when money is borrowed from the Public Works Loan Board. Are the Government prepared to assist in this direction, also?

The hon. and learned Member for Ilford, North, in an exchange a moment or two ago, suggested that the Public Works Loan Board could lend for a shorter term of years than that for which loan sanction had been obtained. It is, obviously, very desirable that if a local authority wants to borrow, particularly at the present higher rate of interest, for a shorter term than the permitted loan sanction, they should be able to do so from the Public Works Loan Board.

The fact is that on no single occasion within my memory—I am told, on no single occasion for a very long time—has the Board lent for a shorter term of years than the length of the loan sanction authorised by the Minister concerned. This, I am told, results from a Treasury direction, and it may be right that this should be so. I hope, however, that the Financial Secretary will do one of two things: either make it clear that the Public Works Loan Board can, if they wish, lend for a shorter term than the maximum period, or indicate in what cases they can do so.

Photo of Sir Geoffrey Hutchinson Sir Geoffrey Hutchinson , Ilford North

Surely, the Commissioners have to conduct their business upon the basis that their advances are made upon what is called the "annuity" basis, and repayment continues during the whole period of the loan. That is an essential factor in the method in which they conduct their business. To do what the hon. Member proposes would be a complete and radical transformation of the whole structure of the Public Works Loan Board.

Photo of Sir Eric Fletcher Sir Eric Fletcher , Islington East

No, it would not. There are two separate matters. I was suggesting a moment ago that the Public Works Loan Board should be given power to grant maturity loans—that is, without annual repayments. That is one thing. I confess that I am not sure at the moment that there is any widespread demand for that, but I think it is desirable that the Public Works Loan Board should have that power to be exercised in appropriate cases.

What I am now talking about is something different. At present, the Public Works Loan Board can only lend on this annuity basis, whereby the principal is repaid semi-annually—that is, every six months—with interest. If, for example, a local authority were given loan sanction to borrow for, say, housing purposes for 60 years, or for a land drainage scheme for 40 years, they might say to themselves, "We do not want to have to borrow at 41 per cent. for all that time. We would rather take a loan for, say, 40 years, if it is for housing, in the hope that when the 40 years has expired the rate of interest will be lower and we can get the benefit of lower interest rates." That is a sensible attitude for a local authority to take, because it means that they might thereby be able to reduce rents, and so forth.

At the moment, what seems to me an unnecessary anomaly is that because 60 years is the standard rate, a local authority cannot borrow from the Public Works Loan Board for less than 60 years. Obviously, it would be to an authority's advantage, if they wanted to do so, to borrow for a shorter term; they could make their own amortisation arrangements, they could catch up in other ways, and could have sufficient money to repay the whole loan in the shorter period. Therefore, in the interests of flexibility, this is desirable; and flexibility, of course, becomes more relevant now that interest rates have gone up.

When my right hon. Friend the Member for Bishop Auckland was Chancellor of the Exchequer, and we had the benefit of cheap money, local authorities were quite glad to borrow for as long as they could; but those conditions have changed. Therefore, what some local authorities are now anxious to be able to do is to borrow, if they want to, from the Public Works Loan Board for a shorter period than the permitted maximum.

I do not want to labour the point. I have done my best to make it plain, and I hope that the Financial Secretary will feel able to give an unqualified assurance upon it. I have tried not to enter into controversial matters about housing policy, rents, and so on. I have tried to put forward the specific matters which are exercising the attention of many local authorities and on which, I hope, we will get a satisfactory assurance from the Government, before we conclude this Second Reading debate.

7.29 p.m.

Photo of Mr Albert Cooper Mr Albert Cooper , Ilford South

I am not a member of the Public Works Loan Board but I have been a member of a local authority for some 17 years, and have therefore been at the other end of the stick compared with the hon. Member for Islington, East (Mr. E. Fletcher).

The operation of the Public Works Loan Board has been going on for some six or seven years, that is, since the 1945 Act. Most of that has been under a Labour Government, in two Parliaments. I do not know how long the hon. Member has been a member of the Public Works Loan Board, but if many of the suggestions which he is now making are good today, surely they were equally good at any time during the past six years.

Photo of Sir Eric Fletcher Sir Eric Fletcher , Islington East

No. They become relevant today because the interest rate has gone up from 2½ to 4¼ per cent.

Photo of Mr Albert Cooper Mr Albert Cooper , Ilford South

The hon. Member speaks as if this Government had increased the interest rate from 2½ per cent. to 4¼ per cent. in one bound, but it did no such thing. There was an increase under the first Socialist Government when housing rents went up all over the country. It was put up, not because of any beneficence of the right hon. Member for Bishop Auckland (Mr. Dalton) but simply because his cheap money policy was inflationary and was destroying the assets of the country, and even the Socialist Government, in 1947 I think it was, had to take steps to correct the situation.

What the hon Member for Islington, East has been saying is, in effect, a defence of the Public Works Loan Board over the past five or six years, but that surely is not the issue of this debate. What we are trying to decide is what is best for the local authorities, for the country and for the taxpayers. It has been said so often during the debate that before the war the larger authorities all went to the money markets and it was only the smaller authorities that went to the Public Works Loan Board.

Today the hon. Member told us that something like 3,000 applications are for sums of £500 or less, and he told us that many of these small authorities would not be able to go on to the market. I think he will agree, however, that many of these £500 claims are not from small authorities at all but in some cases are from large authorities as part of a development scheme. For example, one could cite a housing scheme, and as the scheme developed one might find an additional commitment entered into—boundary walls or special railings—and application would be made for several hundred pounds which ultimately would go into the omnibus loan. I suggest that something like half the 3,000 claims are for the larger authorities for this type of thing.

The hon. Member started by saying that local authorities were deeply concerned at this new policy. When he was taxed by my hon. and gallant Friend the Member for Angus, South (Captain Duncan) as to whether the London County Council was one of these, he professed ignorance of the concerns of the L.C.C. at present. How, therefore, does he know what is in the mind of other local authorities? I submit that there has been no evidence from hon. Members opposite that local authorities are concerned about this change. I suggest, however, that there is evidence, from individual local authorities—and I believe that as time goes on it will show itself throughoutlocal authorities generally—of a very great relief that this concession is being made to them.

Photo of Mr James McInnes Mr James McInnes , Glasgow Central

Would the hon. and gallant Member indicate when local authorities were made aware of the intentions of the Government?

Photo of Mr Albert Cooper Mr Albert Cooper , Ilford South

I am not in the confidence of the Financial Secretary to the Treasury as to when exactly he issues his circulars; I have no doubt, however, that he will tell the House in his own good time. There are many ways in which the operation of the Public Works Loan Board has been too rigid in past years and has operated adversely.

For example, consider a housing scheme. As the houses go up the local authority will borrow its money at various stages of development and immediately it starts to borrow that money it is paying the full rate of interest. Until the housing scheme is completed, it is unremunerative, uneconomic and there are no rents coming in but, nevertheless, interest and amortisation payments are piling up and ultimately they must be met either by increased rents on that particular estate, or by a general levelling out—usually upwards—of rents covering the whole of the council's development.

Before the war and before the operation of the Public Works Loans Act it was possible for local authorities to borrow on short-term from banks from month to month at very low rates of interest, sometimes as low as 1 per cent. The result was that the building up of interest charges and amortisation over the uneconomic period was relatively small and something which was hardly reflected in the rents. Today, under this new dispensation, councils will have the power to borrow their money on the markets, from the bank and even from co-operative societies. In that way they will be making some contribution to the electoral funds of the Labour Party, to which I am sure hon. Members opposite would not object.

I had correspondence on this subject with the right hon. Member for Battersea, North (Mr. Jay) when he was Financial Secretary to the Treasury. I pressed this policy on him over a period of two years, not because I personally had any great experience of this matter, but because my local authority—which has a population of 180,000 and a rateable value of £1,250,000—felt that the policy which the Conservative Government are now bringing forward was the right policy to have carried out over the last two or three years. Many thousands of pounds would have been saved by my authority and others if the Socialist Government had carried this policy through then.

There is another and fundamental reason covering the nation's economy why this step should be taken. I am sure that the hon. Member for Islington, East and other hon. Members will realise that the bulk of the money provided for local authority housing, education and other services under this Bill will be raised by the taxpayer, mostly through the annual Budget on what is called "below the line" expenditure. Something like £400 million is raised in that way. I do not profess to be able even to hazard a guess as to how much money will be saved in the Budget by this concession, but there must be many authorities who will take advantage of this concession. Even if it is only £100 million saved, it will mean £100 million less that the taxpayer has to find. That, surely, is something we should be looking at and which should commend itself to the House.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

Does the hon. and gallant Member realise that it is not true to say that it would lead to any saving to the taxpayer? We could only go outside the Budget if some general national savings were available on which to draw for this purpose, that would have a reaction on the Budget, which nowadays takes account of the whole volume of national saving and investment.

Photo of Mr Albert Cooper Mr Albert Cooper , Ilford South

What the right hon. Gentleman is saying is that if my figure of £100 million—which I confess is a guess—is correct, it cannot be found from other sources of investment. I am perfectly sure that it can be found and also that if this country is to be saved, substantial savings of this order have to be found in the Budget.

I, for one, commend this new policy which Her Majesty's Government have brought forward as sound in every particular and one which will be received with acclaim by local authorities and by the taxpayers.

7.39 p.m.

Photo of Mr Charles Pannell Mr Charles Pannell , Leeds West

It is a melancholy feeling we all share on each side of the House when we hear our best points picked up by hon. Members fortunate enough to catch your eye, Mr. Speaker, before we are lucky enough to do so. So, in search of more information, I have been reading the Bill and I ask hon. Members to read it with me.

Photo of Mr Douglas Houghton Mr Douglas Houghton , Sowerby

"Listen with mother."

Photo of Mr Charles Pannell Mr Charles Pannell , Leeds West

My hon. Friend says, "Listen with mother"; at least it will be an elementary lesson in so far as the facts were denied by the Chancellor of the Exchequer yesterday. I ask hon. Members to turn to Clause 2 and the observations on the second page of the Bill. They read almost like a Labour Party speech. My right hon. Frend the Member for Ebbw Vale (Mr. Bevan) might have made that speech. It explains why the Board have to write off no less a sum than £39,940. The hon. and gallant Member for Ilford, South (Squadron Leader Cooper) will appreciate that I am speaking about houses that were built at a time when the Tory Party had a real majority. It states: Kenfig Homes Limited.The loan was advanced during the years 1921–24 towards the cost of erecting 170 houses at Kenfig Hill, Port Talbot, Glamorgan. Soon after the houses were occupied there was serious unemployment in the district and economic rents could not be maintained.

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Kidderminster

The hon. Member's right hon. Friend the Member for Battersea, North (Mr. Jay) has recited the whole of this already. Is tedious repetition in order, Mr. Speaker?

Photo of Mr William Morrison Mr William Morrison , Cirencester and Tewkesbury

It is not, but it is a matter for the Chair.

Photo of Mr Charles Pannell Mr Charles Pannell , Leeds West

It usually falls to the hon. Member, who has not even a nodding acquaintance with local government, to interrupt those people who have. The observations I have quoted go on to refer to the fact that in the time when hon. Gentlemen opposite were electorally triumphant houses were not occupied, people were unable to pay the rents, and the houses have had to be sold at a loss. I have been present during most of this debate, and if my right hon. Friend has read this previously, I apologise to the House, but I notice that there are Members who have strayed in here from time to time and I suggest that I have refreshed their memory.

The policy in the Bill about which we are speaking is attractive only in so far as the cost of Public Works Loan Board money has been increased. This policy would have had, and had, no attraction to the local authorities during the time of the cheap money policy of the Labour Government, even allowing for the increase in interest rates to which the hon. and gallant Member for Ilford, South referred. Local authorities at that time had no particular interest in going to the market. It was not attractive under the cheap money policy.

I hope that when the Financial Secretary replies, he will say a little more about his proposal that large local authorities shall issue their own stock. I am speaking now as a Member representing one of the large cities, and I feel sure that they will be interested in that proposal. We really ought to know more about it. In Leeds, interest is reflected to the extent of £750,000 annually, so hon. Member will appreciate that to local government circles it is a first class subject that we are debating today.

What has been the record of this Government in connection with the Public Works Loan Board since they have taken office? I believe that the Election was on 23rd October last year. On 23rd November, the Financial Secretary came to the House and told us the proposals for increasing the rate of interest. We had an increase in the Bank rate and an increased interest rate to local authorities. The impact of that on local authority finances, to which I referred in a speech in a debate in which the hon. Member for Peterborough (Mr. H. Nicholls) also spoke was, allowing for the increased interest charges since, the equivalent of an impost of 4s. 4d. on an average for every council house in the country.

That created an impossible position for the local authorities, and the Government's next step was to increase the housing subsidy. I do not think any Member would have argued otherwise, but on general grounds it was regrettable that we had to increase housing subsidies because the cost of money had gone up. As a consequence of this policy, laid down within a month of the present Government taking office, the cost of housing rents went up, and of course housing subsidies from the national Exchequer and the local rates were increased so that they are now the equivalent of about 14s. per house per week.

Photo of Sir Harmar Nicholls Sir Harmar Nicholls , Peterborough

The hon. Member ought to make it quite clear that the increased subsidy was partly to cover the increased building costs that took place under the previous Government.

Photo of Mr Charles Pannell Mr Charles Pannell , Leeds West

I would accept a fair point made by the hon. Gentleman but I really do not accept that.

There was never any suggestion in local authority circles nor was there any expectation on their part or any announcement or any negotiations undertaken by the Treasury about an increase in housing subsidies until the interest rates rose. I am open to correction on that point by the Government Front Bench, but I know the general order of these negotiations. The hon. Member can take it from me, subject to any contradiction from the Front Bench, that that was the point on which these negotiations began. The figures were raised because the interest charges would lay an impost on every new council house in the country, and now we have subsidies of the order of 14s. per week.

Of course, this policy has also been reflected in the fact that local authorities are again beginning to step up their housing rents. Since this policy was begun, and as a result of it, there has been, in Leeds, under a Conservative administration—I am not making any political point here; it would probably have had to be done under any administration—a further increase of 2s. per week on the standard rent and an extra 2s. per head in respect of every person over the age of 21 years. I am not saying that it is an unfair policy—I am making no political point—bearing in mind that it is reasonable that any person aged 21 should have to pay towards a housing subsidy of as much as 14s. per week on the dwelling in which he resides.

The hon. and gallant Member for Ilford, South was quite wrong in his reference to the increase in housing rents that took place previously. They had no relation to the causes to which he referred; the causes were clear and completely different. That round of increases was not in the main inflicted on post-war houses, but on pre-war houses. They were inflicted because before the war about 15 per cent. was allowed in local government as representing housing repairs charges—about £4 10s. a year, taking a broad national figure.

Strange as it seems, in this time of high prices, local authorities generally got along on that basis. There were some subsidies from the rate fund. With the six or seven years of war, deterioration and the cost-plus system for all sorts of repairs to the average council house about which I am speaking, the pre-war council house needed about £100 spent on it by 1946. That represents more than £100 based on the pre-war seven-year cycle of repairs. I make that calculation by multiplying £4 10s. by seven and taking the difference between the result and £100. It will be seen that something like 5s. a week was needed if houses were to be put on anything like a decent basis, not on the basis of a full economic rent but an economic rent, if the subsidy were discounted.

That, broadly, was the position which all local authorities faced. Therefore, housing increases of the order of 4s. 6d. to 5s. per week were made up and down the country. I have studied the subject very closely, and I hope hon. Gentlemen will take it from me that, broadly speaking, the round increase which took place on council houses in 1946, 1947 and 1948, arose from this consideration, and not from the considerations we are debating today.

Photo of Mr Albert Cooper Mr Albert Cooper , Ilford South

The hon. Member is partly right. There were these increases which took place on both postwar and pre-war houses. The point I was making was that there was an increase in many rates under the Socialist Government in 1947. For our sins we had a Socialist council in my town. We have not one now, but that is by the way. But housing rents were up by an average of 3s. a week for that reason alone.

Photo of Mr Charles Pannell Mr Charles Pannell , Leeds West

The hon. Gentleman was speaking broadly of the position throughout the country. I have no doubt that, speaking for the one authority of which he has been a member, he is right, and I would accept his word for everything he said in that connection. I cannot pursue this argument at great length, but he will have to understand that what happened to houses built in the inter-war period all over the country was due to the considerations about which I have spoken. It is no use his speaking about my being partly right. After all, local councils only started putting on post-war rents in the post-war period. If the Ilford Borough Council were so foolish as to fix housing rents so low that they had to put them up the next year because of an increase in the interest rates, it is a reflection on the council.

Photo of Mr Albert Cooper Mr Albert Cooper , Ilford South

That is why I said it was a Socialist council.

Photo of Mr Charles Pannell Mr Charles Pannell , Leeds West

I have no doubt it was a hangover from that Conservative council which existed until a year after the war, when they were cleared out and replaced by a Socialist council. I know Ilford very well. I am not going to congratulate them on their present representation in this House, except from a social point of view. I think that clears up the question of inter-war housing.

What is the chief complaint of the local authorities about the Public Works Loan Board? It may be shown in an extract which I have here from the annual report from the Leeds City Treasurer. These are his words and not mine. He said: A serious criticism of the present system is that money must be borrowed from the Public Works Loan Board for the full period of the loan sanctions. The position is, therefore, that at a time when money rates are high, local authorities are having to borrow at those rates for as long as 60 years, when, in the normal way, they would borrow for as short a time as possible so as to benefit from any subsequent fall. Another objection, though one which mitigates slightly the effect of long-term loans at high rates, is that the full sum of money cannot be retained and repaid on the due date in one amount, but must be repaid in yearly or half-yearly instalments—an antiquated system which causes much needless work. I think we can appreciate that, but in general, referring to the benefits of private borrowing before the war, of course there was no active borrowing undertaken by local authorities that did not have a break clause in it to allow them to take advantage of the market. There could be an argument advanced in favour of this rigidity if money was very cheap indeed, and local authorities then did not mind it very much. But now that money has risen on long-term to 4¼ per cent. there is no point in this rigidity in the Public Works Loan Board at all.

Since this was announced last Thursday, I have had conversations, not only with the treasurer of the city I represent, but also with the treasurer who served me when for 12 years I was chairman of a local finance committee and also with other such contacts which one makes. Broadly speaking, I think the Financial Secretary can take it that this is the most serious complaint that local authorities make against the Public Works Loan Board. In the last resort we want to do well by the local authorities and we want the Treasury to make a good job of this.

I have never regarded the Treasury as a senior partner in local government. The Treasury are an equal partner. We are joint partners in an enterprise of public service. If the price of money is to be increased, they must consider this aspect of it, and it is this question of rigidity which affects the local authorities. There are, of course, loans for shorter periods than 60 years. A housing loan would have to be taken over the full maturity. But if one went to the Public Works Loan Board to re-equip a transport fleet with new lorries, for example, I do not know, but I should think that a period of from seven to ten years would be allowed.

I am sorry that the hon. and learned Member for Ilford, North (Sir G. Hutchinson) returned again to the question of hidden subsidies for the borrowers. When all is said and done, local authorities raise their money from the rates and we raise it generally from taxes. I do not think we ought to speak about hidden subsidies. One could find that aspect of finance in a hundred different ways, but it does seem to be reasonable that where we have to consider the rents—I do not mind very much whether it is the oblique type of subsidy or whether it is on cheap interest rates, although I would choose cheap interest rates in order to keep down the rents—but, as my right hon. Friend the Member for Battersea, North said, this in a degree is a retreat from planning.

I will not hide the fact that this Bill will be generally welcomed by the local authorities—

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Kidderminster

Hear, hear: honesty itself.

Photo of Mr Charles Pannell Mr Charles Pannell , Leeds West

It is not a matter of that at all. It is merely a question of speaking with knowledge rather than with the prejudice so often exhibited by hon. Members opposite. As a matter of fact, one of the most melancholy things during the period of the last Government was that when there was a bit of good news announced from the Government side, the Opposition were always somewhat deflated about it.

Broadly speaking, this Bill will be welcomed, because it does restore a degree of flexibility to the local authorities which was not necessary when cheap money was obtainable from the Public Works Loan Board, but which now, when interest rates are rising, is certainly a very great advantage. I do not want to enter into it now, but district auditors did take a very poor view of those local authorities which used the fund up to about 10 per cent. of their outstanding loan debt on short-term bills, some as low as seven days. That form of money is still plentiful in the towns, but it is no doubt true—and I think that the hon. and learned Member for Ilford, North admitted it—that for long-term money we still cannot borrow cheaper than the 4¼ per cent. allowed by the Public Works Loan Board.

The hon. Member for Peterborough (Mr. H. Nicholls) is not in his place, but I would reflect on the fact that he went rather wide of the mark and dragged in the question of the policy of selling council houses. He said that the Minister of Housing and Local Government ought to start a real sales drive to sell local authority houses. The Minister will have to start with his own local authority, which is a Tory one, and which by resolution has resolutely set its face against his own policy. So presumably he has to convert his own constituents first.

There is another serious criticism which this House can make against Ministers in their negotiations with local authorities. I call the attention of the Financial Secretary to this, because I am not accusing Ministers of being wittingly discourteous to this House, although certainly they have unwittingly been so. When we were discussing the Housing Bill last year—I was a member of the Committee upstairs with certain of my hon. Friends—the Minister announced the notional price of a house as £1,525. At the same time he was negotiating with the local authorities on the basis of the subsidies to be paid. The figures themselves were not known to this House until after the Committee upstairs had concluded its sittings.

Several of us, because of our local government connections, were in possession of these figures. We were inhibited from using this knowledge by the decencies of confidence placed in members of local authorities. I am speaking in this connection as a representative of the local authorities. Ministers should not put Members of the House in that position. They forwarded to my hon. Friend the Member for Wellingborough (Mr. Lindgren) and my hon. Friend the Member for Lincoln (Mr. de Freitas) all the statistics, but they furnished them to the Opposition in confidence. That is not the right sort of action to take. When the House comes to consider Bills about subsidies, its Members should be completely free.

If we had cared to overstep the decencies of public life we could have referred to those figures, because in this House we have unlimited privilege. The Government should not treat us in this way, yet I am afraid that they are doing it again today. Negotiations are going on with the local authorities now. Some of us will be consulted about them. Some of us will know about them in the ordinary course of events, but at this stage we cannot say anything at all about them. Either the timing of these negotiations will have to be different or Members on this side of the House will not feel so completely bound. I do not know why the hon. Member for Kidderminster is laughing. If he wishes to say anything, perhaps he will rise to his feet.

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Kidderminster

I said not a word. We are all very amused by the hon. Gentleman.

Photo of Mr Charles Pannell Mr Charles Pannell , Leeds West

I do not know why one should be amused when a Member is referring to the normal decencies of public life. This is a matter about which we complained to the Minister at the time. We are complaining again now. The hon. Member for Kidderminster has sat here all this time listening to a debate on a subject on which he badly needs educa- tion, because he has no knowledge at all of local government. I hope that he has been interested.

This position has created confusion. One has only to read "The Times" of last Saturday and the "Observer" of last Sunday. They are not Labour Party journals. I do not know whether they support the Conservative Party. Perhaps it is better to say that they are not party political journals. One can see from them that there is complete confusion in those influential organs of public opinion.

I conclude by saying that, broadly speaking, because of the dear money policy, the local authorities will welcome this Bill. But if the Public Works Loan Board is to be part of an effective planned policy, the idea of which is to canalise and regulate all capital issues to local government, the Treasury will have, to consider putting the Board on a more fair basis where they can do greater justice to those whom they serve.

Mr. Deputy-Speaker (Mr. Hopkin Morris):

Mr. Nabarro.

Photo of Mr William Hall Mr William Hall , Colne Valley

I wonder if I might seek guidance, Mr. Deputy-Speaker, and ask the Government just what is contemplated by way of a speech from the Front Bench in reply to the many questions which have been put from this side of the House. When we debated this matter last year we had the advantage of the presence of the Minister of State for Economic Affairs. His contributions on that occasion were most useful. I was wondering whether, if the Financial Secretary has to sit through the rest of this debate, it will be fair on him and on the House—

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

As far as I understand the right hon. Gentleman's point, it does not concern me at all.

Photo of Mr William Hall Mr William Hall , Colne Valley

I was not putting the point to you, Mr. Deputy-Speaker. I was putting it through you to the Front Bench opposite and, in particular, to the Financial Secretary.

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

If the question does not concern me, it cannot be put through me either.

Photo of Mr William Hall Mr William Hall , Colne Valley

May I address you, Mr. Deputy-Speaker, and ask the Financial Secretary to state what are the intentions of the Government?

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

This is not a point of order. I have called Mr. Nabarro.

Photo of Mr William Hall Mr William Hall , Colne Valley

I did not put it as a point of order. I asked if at this stage, for the guidance of the House, we might be told what reply, if any, we are to get from the Front Bench opposite. That is a legitimate point to put.

Photo of Mr William Hall Mr William Hall , Colne Valley

May I have an answer? It is a perfectly fair point.

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

It may be, but it is not a point I can put. Mr. Nabarro is in possession of the Floor of the House.

Photo of Mr John Boyd-Carpenter Mr John Boyd-Carpenter , Kingston upon Thames

On a point of order. I should like to make it clear, Mr. Deputy-Speaker, that this is a matter on which, if I have your permission, I would not deny the right hon. Gentleman or the House any information. On the other hand, it is not for me to dispute the Rulings of the Chair.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

In the interests of the prevention of cruelty to Financial Secretaries, as the hon. Gentleman has had no food since this debate started and as he has exhausted his right to reply to the many questions which are to be answered, would not it be better if the Minister of State for Economic Affairs could be present to listen to the debate, to give the hon. Gentleman a rest, and to reply?

Photo of Mr William Hall Mr William Hall , Colne Valley

We are not putting them to you, Mr. Deputy-Speaker. I submit that we are entitled to a reply. If the Financial Secretary has exhausted his right to reply—

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

Order. The right hon. Gentleman cannot pursue this matter in this way.

8.7 p.m.

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Kidderminster

After this series of interventions from the Opposition Front Bench, few of which were relevant to our deliberations, I might perhaps be allowed to return to the speech made by the hon. Member for Leeds, West (Mr. Pannell). I am sure that the whole House listens with respect to his opinions upon local authority matters in view of his long experience as a serving member of a local authority, but I must confess that my amusement was displayed only because I felt that he was working up purely artificial indignation about the behaviour of the Treasury, in legitimately discussing with certain leading local authorities the proposed change in the arrangements for local authority loans.

Photo of Mr Charles Pannell Mr Charles Pannell , Leeds West

No. It is the custom of the Government in these matters to discuss these affairs with certain well-known local authority organisations, not with leading local authorities.

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Kidderminster

This is splitting hairs. Whether it is the Association of Municipal Corporations or a few of the larger local authorities, it is the fact that a measure of discussion has already taken place on the matters that we have been debating this afternoon.

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Kidderminster

I welcome this Bill for three reasons. It is a measure of freedom, a measure of financial discipline and a measure of economy.

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Kidderminster

The Public Works Loans Bill, which most of us have been discussing today. All our deliberations have centred around two points—whether it is desirable, or not, that certain local authorities should have direct access to the money market and be freed from the monopolistic regimentation of having to go to the Public Works Loan Board, and secondly whether it is desirable that a certain interest rate should be paid for a certain loan.

I think that somebody ought to recount what were the circumstances in the early years of the war which caused the Treasury to require that all local authorities in respect of all loans should go to the Public Works Loan Board. It was merely in the economic climate created by war-time expenditure and the urgent need for drastic and precise control over capital investment by local authorities that it was deemed desirable, rightly I consider, that all capital investment authority should be vested through the Treasury in the Public Works Loan Board. That was a legitimate war-time purpose but, with the return to peacetime conditions, and particularly in the last 12 months, with the increasing freedom in our economy, I think it is desirable that there should be a closer return to the loan arrangements which appertained in the pre-war years.

Photo of Sir Austen Albu Sir Austen Albu , Edmonton

Is the hon. Gentleman saying that it was necessary to introduce the Bill in 1945, when we anticipated a full employment economy, but that it is not necessary under a Tory Government, when we are to have a deflationary economy?

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Kidderminster

I am saying nothing of the sort. What I said was—and evidently the hon. Gentleman did not listen to me—that the monopoly created for the Public Works Loan Board to lend all necessary moneys to local authorities, and to deny access by those authorities to the money market, was essentially a war-time measure.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

What the hon. Gentleman calls this monopoly was not introduced in the war but was introduced by Sir John Anderson in 1945, specifically referring to the post-war period. Has the hon. Gentleman not read Sir John Anderson's speech in January, 1945?

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Kidderminster

What Sir John Anderson did in 1945 was merely a continuation of war-time arrangements and it gave legislative effect to arrangements made under Defence Regulations, introduced early in the war. Throughout the debate, and particularly by the right hon. Member for Battersea, North (Mr. Jay), reference has been made to Sir John Anderson's speech in 1945. What the right hon. Gentleman scrupulously avoids mentioning is the fact that, at the time Sir John Anderson made his speech, there was little question of capital investment for nationalised undertakings—hardly at all.

Photo of Mr Reginald Paget Mr Reginald Paget , Northampton

What has that to do with it?

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Kidderminster

It has a great deal to do with it. The nationalised undertakings today take, in terms of capital investment, a sum which is very much larger than the sums provided under the monopolistic arrangement of the Public Works Loan Board, 78 per cent. of the loans from which are devoted to the housing programme.

Photo of Mr James Callaghan Mr James Callaghan , Cardiff South East

For my information and that of the House, would the hon. Gentleman state which Clause of the Public Works Loans Bill frees the municipal authorities from the monopolistic control of the Public Works Loan Board?

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Kidderminster

That is an irrelevant interpolation. I have been in the Chamber since 3.30 p.m., and there has scarcely been a speech made which has not referred to the relief which is going to be afforded to local authorities in not being required to go to the Public Works Loan Board. There is no specific stipulation to that effect in the Bill, but the hon. Member for Cardiff, South-East (Mr. Callaghan), who is simply trying to be slick in this matter, knows the circumstances very well.

I want to continue on one point in connection with Sir John Anderson's speech, in view of the fact that the right hon. Member for Battersea, North has made such great play of it. He considers, and the Socialist Party have considered for the last seven years, that it is desirable in the Budget to account "below-the-line," and to require that the "below-the-line" expenditure is offset by additional taxation. They have considered it necessary to raise a Budget surplus varying between £350 million and £500 million in order to account for capital expenditure, much of which has been devoted to the housing programme.

But what the right hon. Gentleman never seeks to explain is, if it is desirable to have a Budget surplus to finance local authority loans for housing, why, similarly, is it not necessary to have a surplus in the Budget to offset the capital investment programme, for instance, in the nationalised fuel and power industries? There is no difference in principle between the two.

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Kidderminster

If the right hon. Gentleman will allow me to finish, he made the point in an intervention only a few moments ago, saying that if the Budget surplus were dispensed with, it would have to be offset by another form of saving. But surely we do not seek to offset the capital investment programmes of the nationalised undertakings by a Budget surplus? They are dealt with in another way. Presumably, the Budget surplus which we have had primarily for local authorities for housing can similarly be dispensed with and the expenditure can be financed by private and corporate savings?

Our discussions this afternoon have dealt very largely with that form of local authority borrowing. I am not suggesting, for one moment, that it is desirable to try to create a state of affairs in which a numerical majority of the local authorities seek to go direct to the money market for their finance. That is clearly impossible.

May I give an example from my own constituency? In a county division I have no fewer than six local authorities two non-county boroughs, one urban district and three rural districts. Not one of those local authorities is large enough, in my view, to go direct to the money market for future finance. They would continue, as I consider rightly, to go to the Public Works Loan Board for whatever moneys they required. But what about the county boroughs, the cities, the county councils, and so on, which require large-scale finance? Why should they not go to the money market?

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Kidderminster

The hon. Member for Cardiff, South-East knows little or nothing of public finance matters, in spite of his long experience in assessing other people's Income Tax, which is a very different matter from dealing with public finance.

There is surely no reason why the larger local authorities should not go to the money market and, in certain circumstances, find that their moneys can be provided more cheaply. For instance, why is there any difference in principle between the City of Birmingham or the City of Leicester or the City of Newcastle, on the one hand, raising money for future capital investment requirements, and the Gas Council, on the other hand, which clearly in the course of the next few months will require to raise another £60 million or £70 million for capital investment in a productive undertaking?

Photo of Mr Charles Pannell Mr Charles Pannell , Leeds West

The hon. Gentleman has been unfortunate in taking the City of Birmingham as an example, because the City of Birmingham has the only pukka municipal bank in the country. It has a different sphere of operations from those of almost every other city. It was curious that the late Neville Chamberlain, after having pioneered that piece of municipal Socialism for his own city, subsequently denied it to every other city in the country.

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Kidderminster

I should not seek to justify any of the financial arrangements made by the late Mr. Neville Chamberlain. The point I was attempting to make was that the larger local authorities are in the same position as every other body of comparable size. They should be encouraged to go to the money market, and, what is much more important, to subject themselves to the financial discipline of the money market. That does not necessarily mean what hon. Gentlemen opposite say it means—a higher rate of interest. On the contrary, by astute borrowing, by sound financial advice, by the normal machinery of the workings and operations of the money market, it may well transpire, especially when the term of the loan is suitably varied, that a large authority can obtain its finance on even better terms than those which the Public Works Loan Board are able to provide.

That, however, is speculation. I believe that the freedom of play of the forces of supply and demand on the money market, as elsewhere within the national economy, and competition on the money market, are more likely to create a lower rate of interest than the fixed, rigid, and inflexible operations of the Public Works Loan Board, and its uniform, controlled interest rate. I bow to the experience of the hon. Gentleman the Member for Islington, East (Mr. E. Fletcher), whom I am glad to see returning to his place, and who made such a very well informed speech on the operations and functions of the Public Works Loan Board, and I entirely agree with him that all these little loans for parish councils and so on must, of course, continue to be dealt with by the Board.

I want to make one further point which, I think, is valid and of outstanding importance. I believe that if a substantial part of the "below-the-line" expenditure on housing loans can be transferred from the public lending authority—the Public Works Loan Board—to the money market, that will create a direct economy in public expenditure which can be offset by a reduction in taxation. I believe so. That is a view shared by my right hon. Friend the Member for Blackburn, West (Mr. Assheton) and by my right hon. Friend the Member for Haltemprice (Mr. Law), who spoke of it the other day.

Hon. Gentlemen opposite sneered, when reference was made to this matter earlier today, "The Tories want a shilling off the Income Tax." I remind them that a substantial saving "below-the-line," in the fashion I have indicated, could lead to the removal of the whole of the Purchase Tax—the whole of the Purchase Tax; for there is a Budget surplus of something in the order of £400 million, and if only three-quarters of that could be transferred to money market borrowing instead of Public Works Loan Board transactions, it could be offset by taxation reductions and the sweeping away of the whole of the Purchase Tax.

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Kidderminster

I agree with the hon. Gentleman, though if I were asked for the priority in regard to these taxation measures I should say, in fact, Income Tax first, Purchase Tax next. But no hon. Gentleman in any quarter of the House would, surely, deny that I am correct in saying that nothing could contribute more greatly today to an increase in production, to a saving of labour, to an economy in administration than the sweeping away, in entirety, of the Purchase Tax, and the only way that money could be—

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and North Ayrshire

Order. I think the Purchase Tax is a little wide of the terms of this Bill.

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Kidderminster

I apologise, Mr. Deputy-Speaker, for being drawn into a discussion upon the Purchase Tax, but I was endeavouring only to complete the balance of this balance sheet. However, Mr. Deputy-Speaker, I believe that this Bill, with the Bills that are to follow, will be extremely important in the course of the next two or three years not only because of the further step towards freeing our economy and approaching more nearly the freedom we enjoyed in pre-war years—

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Kidderminster

—but, in addition, because of the financial discipline that only the money market can impose—[Interruption.] Right hon. and hon. Gentlemen on the Opposition Front Bench sneer at dis cipline —financial discipline. I remind them not only of the discipline of the interest rate controlled by supply and demand, but also of the essential discipline of the market place, which is a factor in the operations of commerce which is quite irreplaceable. However, you, Mr. Deputy-Speaker, would rightly check me if I were to pursue that. I am sure that this Measure is one of economy, and can be used by the Chancellor in the next Budget to do what all of us unanimously and so overwhelmingly desire—that is, to reduce taxation.

8.24 p.m.

Photo of Mr Douglas Houghton Mr Douglas Houghton , Sowerby

It is always a pleasure to follow the hon. Member for Kidderminster (Mr. Nabarro) because whatever he has to say he says with geniality and enthusiasm.

Photo of Mr Douglas Houghton Mr Douglas Houghton , Sowerby

If the lion. Member for Kidderminster will allow me, I will come back in a few moments to some parts of his speech, but I wish, first of all, to make an inquiry. Where are the members of the "hatchet group" on the other side of the House—the incipient party within a party which has been much in evidence during the last two days? I did see for a fleeting moment the chairman-designate of this group, the right hon. Gentleman the Member for Haltemprice (Mr. Law), but we have not seen the publicity officer of this group today, the hon. Gentleman the Member for Solihull (Mr. M. Lindsay).