Orders of the Day — Public Works Loans Bill

Part of the debate – in the House of Commons at 12:00 am on 13th May 1966.

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Photo of Mr Peter Hordern Mr Peter Hordern , Horsham 12:00 am, 13th May 1966

I cannot recall what the hon. Gentleman said about his right hon. Friend, but certainly the hon. Member for Islington, North in the debate last year urged completely free access to the Board for housing, and I did not notice that kind of remarking coming from the Government side during this debate.

The hon. Member for Stoke-on-Trent, Central (Mr. Cant) referred to the issuing of local authority bills. There was a movement among local authorities last year for local authority bills to be issued and it was said that they were guaranteed a warm welcome in the City. The Radcliffe Report dealt with this matter carefully and cogently, the point being that if local authorities are allowed to issue their own bills, the clearing bank systems would be allowed to count local authority bills as part of their portfolios, and thus the Government's ability to have an effect on and to control total expenditure to that extent would be nullified.

The hon. Member for Croydon, South (Mr. Winnick) strongly criticised the limitation of the quota. The criticism of hon. Members opposite in previous years has always been that the interest rate charged by the Board was too high and they have argued for a differential rate. This is a very old argument. It was Francis Bacon who, more than 300 years ago, said that there was a very strong argument for differentiating interest rates—one rate for Bacon and other rates for everybody else. I believe that the Government have become far more responsible, in terms of action rather than talk, since they have been in power on interest rates in general, obviously for reasons not all of which have been within their control.

When the Financial Secretary introduced the last Public Works Loans Bill in July, he said that he expected the £500 million then to be provided to last well into next year. It is difficult to know whether at that time he meant the calendar year or the financial year, but we have not got very far into this financial year yet and he is asking for another £900 million. It is reasonable to ask how long he expects it will last this time. I think that he said that it might last until the middle of next year.

I do not know how he can work out just how long it will last, because these matters are not capable of precise estimates. The estimated net cost to the Board last year was supposed to be £360 million, but the outturn was £525 million, or about 30 per cent. out. The estimate for this year is £398 million. One cannot help but admire the precision with which the Treasury makes these estimates within £1 million. It is rather like the racing tipster giving not just the first three horses, but the first six and the distance between each. I think that these figures should be regarded with precisely the same amount of suspicion as one would regard the racing tipster.

The fact is that this estimate is just as likely as the estimate of time to be as much a shot in the dark this year as last. It is therefore interesting to review the course of events of the past year and to see see whether it is possible to draw any conclusions about this year's Bill. During the course of Second Reading last year, on 19th July, the Financial Secretary said that local authority temporary debt was 19 per cent. of total local authority debt as at 31st March.

He did not know, he said, what proportion of the debt came from abroad. He must have known that it was a pretty high proportion, because he must have observed the effect of the massive withdrawal of funds during the months of the sterling crisis. I can well remember during that period local authorities paying 8 per cent. to 9 per cent. for seven-day money. On one occasion that I can recall local authorites were offering up to 12 per cent. and 13 per cent. for overnight money. That was the position during the sterling crisis. Certainly the effect was that of the total estimate of £360 million net for the whole year no less than £157 million was drawn from the Board in the first 10 weeks of the year.

This is where the effect of the sterling crisis was felt—not just on the country's monetary reserves but in the coffers of the town halls. So many of the activities of the town halls are necessarily longer-term activities, ranging from housing to drainage, and these activities were being financed short-term by foreign funds, as the hon. Member for Rotherham, has said. The Government's mishandling of the economy which led to the crisis of confidence had an immediate reaction on the local authorities.