There have been repayments over the past, but the figure of outstanding debt, which is given in an annex to the Layfield Report, was £10,150 million in 1975–76. I want to try to get clear what we are authorising the Public Works Loan Board to lend in total to local authorities.

Secondly, the loans are those made in pursuance of Section 3 of the National Loans Act 1968. That Act has a schedule which allows the Public Works Loan Commissioners to lend to all sorts of other people other than local authorities. It may be that what they lend to other people is very insignificant. But it seems to be included in this total figure for the £2,000 million tranche that we are asked to authorise. Perhaps the Minister can give us a breakdown of that. If it is insignificant, let him put on record that that is so.

The third point on the order itself is that, under that section of the Finance Act 1975, the aggregate amount to be loaned, if we are coming up to the £2,000 million, includes both commitments as well as actual loans.

I am not sure how far ahead the Public Works Loan Board's Commissioners commit themselves. It may be that there is a substantial sum in the kitty which has not been paid out but which they have given undertakings to pay or to lend to local authorities. If the Minister could give us some indication of that it would be helpful.

The major point we ought to be debating is the timing of this order. Whether these tranches of £2,000 million every so often—and the Minister has told us that it will not be once a year but may be more frequent—is too much or not enough depends entirely on the outcome of discussions which are now proceeding on the draft code of practice on local authority borrowing.

This draft code has come into existence in the following circumstances. Local authorities have been raising more and more short-term loans. By that I mean loans of under a year to maturity. They have been borrowing short-term to pay for their capital spending.

There is some restriction on the amount which they can borrow. They must not borrow more than 20 per cent. of their total outstanding debt nor more than one-and-a-half times last year's capital expenditure. Both those figures can be substantial. Indeed, they are substantial sums in some cases and, in addition, there are one or two loopholes. If local authorities borrow for just over the year such borrowing does not come within the restrictions. If they borrow on what is called "option borrowing", again they can get out of the restrictions.

The advantage to local authorities of borrowing in this way is that, generally speaking, the shorter the loan the lower the rate of interest. Also, they can take advantage of any drop in interest rates and any fluctuations in the rates. Many of the authorities are tempted to go in for short-term borrowing in a big way. The proportion of outstanding debts of local authorities borrowed on short term—under a year maturity—is 45 per cent. to 50 per cent. of their whole indebtedness. That is about £12,000 million.

In the West Midlands over three-quarters of its £52 million debt is on seven days' call. There is a serious risk in this. There may easily come about a liquidity crisis with this sort of borrowing, when money has to be repaid quickly. Suppose that local authority could not meet its redemption dates. We might even go so far as to have a New York situation. It could be serious. I do not say that it is serious at the moment, but there is this risk.

The solution to this is for the Government to put statutory restrictions on short-term borrowing but at the same time to increase the availability and attraction of Public Works Loan Board borrowings.

That is why I come back to the order and say that its introduction is untimely, when this draft code of practice for cutting down short-term borrowing and swinging over to long-term borrowing is under discussion and will, if accepted, have to be backed up by making Public Works Loan Board borrowing far more attractive. The alternative to statutory restrictions is the voluntary code.

The voluntary code has been drawn up by a group of local government officials, and—if I am correctly informed—would form an agreement with local authorities to change over from this very short-term borrowing to get an average of four-year loans throughout their indebt ness in this year, working gradually to an average of seven-year loans, instead of less-than-one-year loans, by 1980.

The success or otherwise of that plan must depend on how far the Government will go in backing it with the public works loans system. That is why I think that we could have waited a little longer for this order, to see what would happen about the agreement with all local authorities and the Government on this code.

If local authorities can successfully switch to borrow long term, and have the average of their borrowings on as long as four-year terms, they will not—let us admit this—be as attracted to banks, insurance companies, developers, building societies, and pension funds, and so on as they are at present. If those sources of revenue and of capital for the local authorities were taken away, the Government would have to be prepared to step in. The only way in which it can step in is to make the public works loans system far more attractive.

It would have helped if the Minister had informed the House a little more about the progress of consideration of this draft voluntary code and if he could give us some assurance that, if we approve this order, he may well have to come back again in a fairly short time with a back-up to the code, with a difference—perhaps an increase—in the amount available in public works loans.

I believe that the Minister said that this order would last for only six months.