CLAUSE 1.—(Prohibition of borrowing otherwise than from Public Works Loan Commissioners.)

HC Deb 08 February 1945 vol 407 cc2297-339

2.18 p.m.

Sir John Mellor (Tamworth)

I beg to move, in page 1, line 5, at beginning, insert: During the period of five years from the date on which this Act shall have come into operation. The purpose of this Amendment is to limit the operation of Clause 1 to five years. This Clause prohibits local authorities from borrowing otherwise than from the Public Works Loan Commissioners, except with Treasury consent. In his Second Reading speech, the Chancellor of the Exchequer repeated an assurance which he had given already to the local authorities that the prohibition would only be continued as long as may be necessary. During the Second Reading Debate I raised the point whether that assurance would be binding upon Chancellors of the Exchequer in future Governments and the Financial Secretary, in his concluding speech, said most emphatically that in his view it would be binding. The speech made by the hon. Member for East Stirling (Mr. Woodburn), who spoke on behalf of the Labour Party, immediately following the speech in which the Chancellor of the Exchequer had referred to that assurance, was most illuminating. He began in this way: On behalf of my hon. Friends I welcome this Measure as a step towards the tidying up and the improvement of our general financial relationships. Later in his speech, referring to the Chancellor of the Exchequer, he said: This might mean a temporary Bill. I hope that that is not the case. In practice I am satisfied that it will justify itself and will be permanent."—[OFFICIAL REPORT, 24th January, 1945, Vol. 407, c. 918 and 924.] That speech, being made immediately following the Chancellor of the Exchequer's assurance, indicates that in the view of the official spokesman of the Labour Party that assurance would not count for very much. If I have misinterpreted what the hon. Member for East Sterling intended, I shall be very glad indeed to give way.

Mr. Woodburn (Stirling and Clackmannan, Eastern)

The point is that the Chancellor of the Exchequer said that he would consider it after five years and nothing that I said prevents consideration of the Measure after five years.

Sir J. Mellor

The Chancellor of the Exchequer said that this prohibition would only be continued as long as is necessary, and I submitted that that assurance would not, unless incorporated in the terms of this Bill, in any way be binding upon Chancellors of the Exchequer in future Governments. I was only pointing out that the hon. Member for East Sterling, speaking on behalf of the Labour Party, supported my contention, which had been rejected by the Financial Secretary to the Treasury. But supposing this assurance were binding upon future Governments, what is it really worth? "As long as it may be necessary" is a very vague expression and can easily be interpreted to suit the taste and fancy of any administration that may happen to be in office. The Financial Secretary to the Treasury also contended that it was inappropriate to have a time limit introduced into the terms of the Bill. He said: The local authorities themselves have never asked for a definite time limit to be placed in the Bill on this scheme. They asked for the assurances that we have given. That may have been the case, but I understand that a very large number of the local authorities consider that the assurance should be reflected in the terms of the Bill. I have been assured by my hon. Friend the Member for Stone (Sir J. Lamb), who is Vice-Chairman of the County Councils' Association—and what I say, no doubt, he will confirm when he speaks later in the Debate—that the County Councils' Association desire this Amendment. In so far as I have been able to have informal communications with persons who are concerned with local government finance in my constituency I have found that they take the same view and desire to see a time limit in the terms of the Bill. The Chancellor of the Exchequer said that one reason why it was inappropriate to have a time limit was that this is a novel scheme. That is a very strong reason for having a time limit in order that there may be an automatic review in this House when we have gained some working experience of the scheme. The Financial Secretary also said: It is quite impossible to forecast now what will be the period of years for which this scheme will be necessary. It may be four, five or six years." [OFFICIAL REPORT, 2nd February, 1945, Vol. 407, c. 1789 & 1790.] Taking the longest period the right hon. Gentleman named—six years—I am prepared, if the Government will accept it, to alter this Amendment, if the Committee will permit, from five years to six. All that I want to secure is that there is a definite time limit in the terms of the Bill which will secure the automatic re- consideration by Parliament at a reasonable time. The reason I took the period of five years as in my view most suitable, is that the Chancellor of the Exchequer has undertaken at the end of four years to review the whole matter with the local authorities. Unless we have some automatic review by Parliament provided for within a definite limit of time this sort of thing may roll on for a very long time, if not for ever.

Clause 1 gives immense power to the Treasury and we know that Government Departments—and I do not blame them—like to have all the power they can command. They have great confidence—often rightly—in their own capacity for administration and believe that if they have more power the better for the country. That is their view, and they are entitled to it, but there is no reason why we should share it. It is our duty when we have a Measure which is only proposed to be temporary—this is the Chancellor of the Exchequer's case—not to introduce it in permanent form. If we do it in this case and enact Clause 1 in permanent form we shall be setting a very bad example for further legislation which will come before this House in the near future dealing with the multitude of matters arising for the period of reconstruction. We should say in the terms of Clause 1 exactly what we mean. If we mean its operation to be temporary, we should say so and impose a time limit.

Mr. Colegate (The Wrekin)

I am very glad that my hon. Friend the Member for Tamworth (Sir J. Mellor) has put down this Amendment on the Paper, and I have every intention of supporting him, because I know that there is a very wide feeling among local authorities that some such protection as is provided by the Amendment should be put into the Clause. This is the first time in 50 years—it is 50 years since the last great Measure of local government was introduced—that there has been a proposal before the House of Commons to diminish or take away powers of local authorities. This financial autonomy was one of the marks by which this vigorous system of local government was known to everybody, as something which was, to a very considerable extent, independent of the central Government. Now we are proposing to carry through a Bill which would take away one of the most cherished privileges of any form of self-government, namely, the power of finance. It is essential, therefore, that this Committee, before it allows the powers of local authorities to be tampered with in this way, should set a very definite time limit to the period during which the Bill should operate.

It must be remembered that this is being done just at the moment when Parliament is placing upon the local authorities the biggest burden of work that has ever been placed on the shoulders of local authorities. These things are not going to be carried by the Government or by the House of Commons. The great burden of the housing programme and other things has to be carried by the local authorities in this country. Therefore it is essential that we should do everything in our power to maintain the prestige of the local authorities, because we have to attract to this service some 20,000 or 30,000 unpaid people in every department of local government. Is this the time to lessen the prestige by reducing the status of the local authorities? Surely not. However much we sympathise with the purposes of this Bill, it is necessary that there should be this protection of a time limit.

2.30 p.m.

Let me say a word with regard to the assurances that have been given. We have heard many complaints of legislation by reference, but some of us are beginning to think that the real danger is legislation by assurance, because each Bill is accompanied by a mass of assurances which we cannot get put into the Bill itself. As the hon. Member for Tamworth pointed out, Governments change, opinion changes, and it may well be that a Chancellor of the Exchequer in three or four years' time may not be in a position to honour the assurances which are being given by the present Chancellor. That is not unknown; it has happened before. It is to the House of Commons alone that the authorities look for their protection, and surely, therefore, it is for this Committee now to say very definitely, "If we do agree to discrimination in the powers of local authorities for a certain definite period, we shall limit it to some such period as five or six years." It is essential that we should put that protection in the Bill, so that everyone concerned—the central Government, future Parliaments, and the local authorities—may know exactly where they stand.

Sir Joseph Lamb (Stone)

On behalf of the County Councils' Association, I should like to associate myself with this Amendment. Its purpose has been so clearly stated by the last two speakers that it is perhaps unnecessary for me to say much more, but let me say clearly that I believe the local authorities are very desirous of assisting the Government in every way they can in the social work which is being placed upon them. It is only that desire to assist the Government which induced them to accept the proposals in this Bill. I must make that quite clear because, as the hon. Member for The Wrekin (Mr. Colegate) said, it is an infringement of rights which the local authorities have enjoyed for many years.

It is true that an assurance has been given, but what is the meaning of the word "assurance"? I think it means something that must assure, and unless there is something in the Bill itself there is no assurance. The very fact that it is not in the Bill leads us to doubt whether the assurance is really genuine, because no matter how much we may respect the words of those right hon. Members who speak from the Front bench, they are effective only for ourselves personally, and, when it comes to a question of administration, we are told that what is not in the Bill is not effective. Consequently, I am afraid I must say definitely that the omission to put anything in the Bill does not coincide with the statement made when we were discussing this point.

We ask seriously if this is to be a temporary Measure. If it is, I take it that it will be for the purpose of enabling the local authorities to obtain money at reasonable and lower rates than perhaps would otherwise be possible, because of the tremendous demand there will be for money after the war. So we ask whether it is to be a temporary Measure, and we must have that assurance in the Bill. If it is to be a permanent one—and here again I say that if it is not in the Bill it will be permanent so far as practical politics are concerned—then I fear we must oppose it, because it is giving away rights which the authorities have exercised for many years without a real assurance that this is a temporary Measure for the advantage of the country during a period which will, perhaps, be a very difficult one if we are to erect all the buildings necessary and to obtain all the money for our social services at reasonable rates. I have not much more to say on the point, except that I am authorised to support this Amendment, and I hope the Government, by the fact of including it in the Bill, will justify our acceptance of their statement that it would be limited to four or five years.

Mr. Lewis (Colchester)

I want to support the Amendment, and would ask hon. Members to consider what the position will be in four or five years' time, when, presumably, we shall be back to the system of party government. If this Amendment is carried, and the Bill is due to lapse at the end of five years, it would in the event of the Bill giving general satisfaction, be a very simple matter for the Government of the day to promote a one-Clause Bill to extend its time. Suppose, however, that the Amendment is rejected and that the Bill does not give general satisfaction; suppose there are some local authorities who feel aggrieved with what has happened under it, either because they feel they have been unduly delayed in getting the money they want or because they are not satisfied with the terms on which the money has been available; and suppose the Treasury wants the Bill to continue. Perhaps hon. Members will consider how difficult it would be under those circumstances to pass a Bill putting an end to this one. The Chancellor of the Exchequer, in his speech on Second Reading, said: … it has been confirmed that the new scheme will continue in operation only for so long as it is necessary."—[OFFICIAL REPORT, 24th January, 1945; Vol. 407, c. 909.] Yes, but who is to decide whether it is necessary or not? There might be a sharp conflict of opinion between the Treasury, on the one hand, and many local authorities on the other, and I submit that under those circumstances it would be most difficult for those local authorities to get effective action taken in this House. For that reason, I would urge that the Amendment is a reasonable and desirable one.

Here I would like to comment for a moment on the absence of the Chancellor of the Exchequer. This Bill is his Bill; his name appears on the back of it. This Amendment is an important one, asking for a substantial alteration in the Bill, and the Chancellor is not here to listen to the arguments that may be brought forward in favour of the Amendment. I see the Financial Secretary to the Treasury, but his presence is a very different thing. I have no doubt that the present Financial Secretary to the Treasury has a lively recollection of the fact that a predecessor of his once lost his office because he accepted an Amendment in the absence of the Chancellor. My right hon. Friend, being a cautious man, is not likely, I think, to repeat that experience this afternoon—[An HON. MEMBER: "Not now that he has been warned."]—and I challenge him to answer this question when he replies: Has the Chancellor of the Exchequer authorised him this afternoon to listen to the arguments in favour of this Amendment and to exercise his judgment as to whether they are sound or not, and to accept or reject the Amendment accordingly? Has he instructions from the Chancellor of the Exchequer to reject the Amendment in any event? I think the Committee is entitled to know that.

Captain Thorneycroft (Stafford)

I rise for only a few moments to say that I hope very much that the Financial Secretary, whatever authority he has from the Chancellor, will, in fact, resist this Amendment. I believe that my hon. Friends who have argued their case with great moderation, are on bad ground on this point. I thought it was generally agreed on all sides of the Committee that some form of control of public investment had to be exercised for a number of reasons, and not least in order to maintain some kind of stability of employment. The Chancellor of the Exchequer, I understand, gave an undertaking that the question would be reviewed after four years. May I say that I have not the slightest doubt, if there were a Labour Chancellor of the Exchequer at that time, that he would review it with the local authorities and discuss the problem with them? The suggestion was made, however, that if the Government changed the pledge would not be honoured. I say that if there were a change of Government that pledge would be honoured. [An HON. MEMBER: "Why?"] I am certain that if there were a Labour Chancellor of the Exchequer the principle of this Bill would be continued. I hope very much that the principle will be carried on. I am really rather at a loss to understand the attitude of the hon. Member for The Wrekin (Mr. Colegate)—a neighbouring division of mind—whose views on these matters I always respect because I know that he has studied this subject very closely. He emphasised the burdens being placed on local authorities at the present time, the legislation which is being passed, the housing programmes, and asked whether this was the time to take away their powers. Surely it is just because we are placing these burdens and programmes on them that we do not want them all to rush into the money market at the same time. We must exercise some control.

Mr. Colegate

This Clause has nothing whatever to do with access to the capital market. That has already been provided for by the Capital Issues Committee, as was pointed out by my right hon. Friend the Financial Secretary in his speech. Nothing we say or do on any part of this Bill will affect the queueing up for the capital market.

Captain Thorneycroft

This is a Government agency, and the point is perfectly simple. I appreciate the point made by my hon. Friend, but clearly, when we have an enormous programme of work of this kind, some such agency is required. I think there is no difference between us, because my hon. Friend admits that it is required for the reconstruction period. My own view is that it will be required in the future as well. I hope, for those reasons, that the Financial Secretary will reject the Amendment.

Sir J. Mellor

Do I understand that my hon. and gallant Friend desires the prohibition in Clause 1 to remain permanent? If so, what importance does he attach to the assurance given by the Chancellor of the Exchequer that this prohibition will not be continued longer than is necessary?

Captain Thorneycroft

The importance I attach to the pledge is that I am sure it will be honoured by any Chancellor of the Exchequer. At the same time I hope that any Chancellor of the Exchequer will continue the principle which is established in the Bill.

Mr. Butcher (Holland with Boston)

I always listen to my hon. and gallant Friend the Member for Stafford (Captain Thorneycroft) with great interest and attention, because I know how deeply he is impressed by this problem, but, if he will allow me to say so, I think he has completely misunderstood the opposition to this Clause as it now stands. The case put by the hon. Member for Tamworth (Sir J. Mellor), with which I entirely associate myself, is this: is the future Chancellor of the Exchequer—whatever may be his political complexion—to find the assurance written into the Bill, which will be brought to his attention definitely at the end of a fixed number of years, or is he to go searching through the pages of HANSARD for vague assurances made by his predecessor? Those of us who wish to see this Amendment written into the Bill are entitled to ask that the assurances given by the Chancellor of the Exchequer shall appear in the Bill.

2.45 p.m.

Sir William Wayland (Canterbury)

I have been asked, on behalf of local authorities, to support this Amendment because they claim that they ought to be able to borrow in whatever quarter they can, whether from Government or outside sources. They plead that, for many years, they have not been subjected to bureaucratic control, and that the tendency nowadays is to centralise everything in Whitehall. They are very much opposed to that. I cannot see why the Government should not accept this Amendment. Unlike any previous speakers, I have no confidence whatever in the promises of any Government, whether Conservative, Labour or Liberal. A Chancellor is in office for a certain time, and any promise he gives applies only so long as he occupies that position. When he leaves, his successors say that they will not be bound by the promises of any of their predecessors. Acceptance of this Amendment would not hurt the Government, because after five years the matter could be revised.

Mr. Gallacher (Fife, West)

When I heard the amazing arguments of hon. Members opposite I could not resist saying something on this Amendment. The hon. Member for Holland with Boston (Mr. Butcher) said that it would be better to have an assurance in this Bill, rather than that the Chancellor should search the pages of HANSARD for an assurance by one of his predecessors. I am quite certain that whoever the Chancellor may be, the moneygrabbers on the other side will not let him forget, when we come to the end of the fixed period, that an assurance was given four years previously. Am I to take it from the arguments which have been put up, that there is a bunch of philanthropists in the country who are anxious to give away money for nothing? What is the situation that exists? In many districts, members of local authorities are associated, directly or indirectly, with those who are financing those authorities, with the consequence that local authorities have to pay far more than is necessary for the money they require. Houses have to be built, and education has to be developed, and the situation demands that there must be a measure of control, to ensure that the best results may be obtained from the money which is available, with the least possible difficulties about interest rates. There is not a Member on the other side who is prepared to oppose the principle of this Bill—

Sir J. Lamb

If the hon. Member had read the Amendment before he started to speak, he would have seen that we were not against control, but were only asking that it should be limited.

Mr. Gallacher

There is not one Member opposite who dare get up and oppose the principle of this Bill. Members on the other side hope that as the years pass they may get into a stronger position so that they will be able to look after their own interests as against those of the community. Control to-day? Yes, because they dare not come out against it, but they are always hoping that in the future they will be able to break control, and rook the country to their hearts' content. Should anything special come up four years hence, Members opposite—if they are still here, and I am doubtful whether most of them will be—will be only too ready to draw the attention of the Chancellor to the assurance that has been given.

Mr. Woodburn

I do not want to take up time discussing the merits of this Bill, which the House has accepted in principle, but it has been suggested that if, by any chance, the Labour Party should be the responsible Government when the time for review of this matter comes up they would refuse to review it. [An HON. MEMBER: "No."] Yes, that suggestion has been introduced to prejudice the Committee in the discussion of this simple Amendment.

Mr. Lewis

Who made that suggestion?

Mr. Woodburn

An hon. Member behind me quite clearly indicated that a Labour Chancellor could not be trusted to review this matter.

Sir J. Mellor

I drew attention to the fact that the hon. Member said in his speech that this might need a temporary Bill, that he hoped that would not be the case, and that in practice he was satisfied that it would justify itself and be permanent. I make no complaint of that, but I pointed out that this was immediately after the Chancellor of the Exchequer had given an assurance that prohibition would not be continued longer than necessary.

Mr. Woodburn

That is another point altogether. If this proves satisfactory to local authorities, when the House reviews the Measure, as it might, it will obviously continue it of its own free will. The only point is whether it is desirable to put into the Bill an Amendment to say that in five years from now the Measure should come to an end. That may be an inconvenient arrangement. To say that the Measure must lapse on a given day would be a most inconvenient way of reviewing a situation of this kind. The question of what Government is in power makes no difference because any Government can carry their will through the House, whatever that will may be, if they have a sufficient majority. I would also like to refute the suggestion that the Labour Party is less responsive to local government needs—

Sir Herbert Williams (Croydon, South)

Is the hon. Member making the declaration that a General Election has no significance, and that a party has no power to bind its successors?

Mr. Woodburn

If a Chancellor of the Exchequer gives an assurance that a matter will be considered in five years, and the House accepts that, then every party in the House is accepting it, and not merely the Chancellor who is giving the declaration. It is the House of Commons which accepts it.

Sir J. Mellor

The Chancellor of the Exchequer went much further than promising that the matter should be reconsidered in five years. He said that the prohibition would not be continued longer than necessary.

Mr. Woodburn

I say it is not convenient to bring a Measure like this to an end in five years. The local authorities have well-established means of making their wishes known to the House; I have never found them in the slightest difficulty in declaring whether they were pleased with what was happening or not. If the Bill does not work I am satisfied that the local authorities will find means of making their desires known. The suggestion that every local authority has a genius for getting cheap money is simply fantastic—

Mr. Colegate

That does not arise on this Amendment.

Mr. Woodburn

The suggestion has been made that this will hamper local authorities in getting cheap money and that the Government will inveigle them—

Mr. Colegate

That arises on the next Amendment.

Mr. Woodburn

No.

The Deputy-Chairman (Mr. Charles Williams)

I think we might keep off that point, until we come to the next Amendment, which does deal with it.

Mr. Woodburn

The argument was definitely brought in that the interregnum between now and the next five years would throttle the local authorities in carrying out their work efficiently. When one remembers what happened in 1929–30, and some of the agencies to which local authorities resorted in order to get money, I think there is some doubt as to the wisdom of all local authorities in this matter. But in any case, on the purely practical point, I think this is a most inconvenient arrangement to say that the Act which will result from this Bill must automatically lapse on a given day, no matter what may be the situation at that time.

The Financial Secretary to the Treasury (Mr. Peake)

I have listened to the Debate with interest but I do not think this is a matter over which the Committee need get very excited. It is true that the scheme embodied in the Bill is a temporary measure, and if I thought we could improve it by fixing a definite term of years—four, five, six or eight years or some other period—I should be quite in favour of accepting an Amendment on those lines. May I say, in response to my hon. Friend the Member for Colchester (Mr. Lewis), that the confidence between myself and my right hon. Friend the Chancellor is such that I have full authority to speak on his behalf in this matter, and that the confidence between my right hon. Friend and myself appears to be a great deal firmer than the confidence between His Majesty's Government and hon. Members who are supporting it from the back benches?

Mr. Lewis

I did not ask whether my right hon. Friend had any authority to speak for the Chancellor; I asked whether he had authority to accept the Amendment if he thought the arguments were sufficiently good.

3.0 p.m.

Mr. Peake

The short answer is that I do not think the arguments sufficiently good, and that I have not heard any arguments raised here to-day which were not present in our minds before, or which were not mentioned in the Second Reading Debate. My hon. Friends the Members for Tamworth (Sir J. Mellor) and for Stone (Sir J. Lamb) both purported to be expressing the views of the County Councils Association. I will read the assurance for which these local authorities asked and I will read the Treasury's reply. On 16th October, in a letter to which the first signature was that of Sir Sidney Johnson, Secretary of the County Councils Association, and which was also signed by the Secretary of the Association of Municipal Corporations, the Secretary of the Urban District Councils Association, the Hon. Clerk to the Metropolitan Boroughs Standing Joint Committee, the Clerk of the L.C.C., and the Secretary of the Rural District Councils Association, they wrote as follows: The representatives are now prepared to recommend concurrence in principle in the proposals, subject to formal assurances on the following points:

1. (1) That, as suggested at the meeting by the Chancellor, the new scheme will continue for so long only as is necessary and that, if Treasury control of borrowing has not ceased at the expiration of four years after the end of hostilities in Europe, the future operation and extent of such control will then be reviewed by the Treasury in consultation with the local authorities. …"

On 4th December a letter was despatched from the Treasury to these six gentlemen who acted on behalf of the local authorities and with their authority. It included this passage: The new scheme will continue only for so long as is necessary, but my Lords will be ready to review it in consultation with the Local Authorities, at the expiration of four years after the end of hostilities in Europe.

Sir J. Mellor

Will my right hon. Friend agree that, whatever was said in the course of those discussions, it is our business in this House to decide what form we use in the enactment of business?

Sir J. Lamb

My right hon. Friend has put the matter very clearly, and can corroborate what he says, but the assurance will not be effective unless it is in the Bill.

Mr. Peake

It is quite clear that we cannot embody that type of assurance in an Act of Parliament, and that is why my hon. Friend's Amendment has been put down. The House of Commons is not bound by any arrangement or understanding come to between the Government and the local authorities and, of course, it is possible for the House to step in and make some other arrangement setting a definite term of years to the Bill. The mover asked, if we did not like five years, whether we would make it six. I should have thought that hon. Members in every quarter would have seen the extreme difficulty of fixing any period for operations of this kind. No one knows how long it is going to take to establish all the housing schemes which will be necessary after the war. What we want is to arrange for orderly borrowing by local authorities at cheap rates. We have announced what the rates are—they are highly favourable—and we want local authorities to come forward and get their money without delay when their schemes are ripe for putting into effect. Suppose we were to put a definite term in the Bill and have a guillotine fixed; it is then clear that, if these re-housing schemes do not get going as fast as hon. Member's would wish, the local authorities will find themselves up against this time limit.

Sir J. Mellor

The Amendment only affects the prohibition in Clause 1. It does not affect the scheme in the rest of the Bill. Supposing, when the time has arrived, there is a limit of five years, what is the difficulty about a one-Clause Bill extending it by a further five if necessary?

Mr. Peake

The short answer is that no one can possibly tell at present whether this Measure will be required for any specific period between three and ten years. It is impossible to fix any definite time limit at all. No one knows how quickly reconversion processes are going to take.

Sir J. Mellor

Really my right hon. Friend should answer the point a little more candidly than that. What is the difficulty, when you approach the time limit of five years, about introducing a one-Clause Bill to extend the period?

Mr. Peake

I do not think my hon. Friend is really quite doing his case justice. It is clear that local authorities must be able to see a little way ahead. They must be able to know at present that, if they come into the market within the next few years, they will get their money at the cheap rate promised by the Bill. If you have a definite time limit, you will reach a stage where there is a state of uncertainty. No one will know whether the Government are or are not going to introduce a one-Clause Bill to prolong the operation of Clause 1.

Sir J. Mellor

rose—

The Deputy-Chairman

I think it would be better to allow the right hon. Gentleman to make his statement. This is Committee stage, and hon. Members can make further speeches if the statement is not satisfactory. It is more convenient to have a single argument put at a time.

Mr. Peake

I have said that this is a matter over which there is no need, as far as I can see, for great excitement. We have satisfied the local authorities with the assurances they wanted. There will be standing committees of local authorities in England and Wales and in Scotland, throughout the working of the scheme, in constant touch with the Treasury. I should have thought that, if the local authorities, who are the principal persons concerned and upon whom the prohibition is laid by Clause 1, were satisfied with the undertakings that have been given, the House of Commons might have been satisfied also. The hon. Member opposite has made it clear that his party subscribe to the undertakings that have been given by the Chancellor of the Exchequer, but does anyone really think that, if the pledge given on behalf of the Government of the day is broken, local authorities are not sufficiently influential to see that there is an unholy row in the House of Commons? I should have thought that, the local authorities having expressed their satisfaction with it, the course that we propose is better than fixing a definite time limit, for that is bound to be inconvenient as the period of the Bill draws to a close, and is bound also to result in a great many local authorities promoting hurried schemes in order to try to get their money at a cheap rate before the Bill runs out. All the arguments from the point of view of common sense lie in favour of leaving the matter open now and leaving it to the review, in four years time, which has been promised. I hope that hon. Members will not think this is a matter of sufficient importance to take to a Division. In my view the pledge that has been given is astisfactory. It will be carried out, and it will be more practicable than putting a fixed guillotine in the Bill, which would lead to uncertainty at the time when the legislation will in any case have to be automatically reviewed.

Sir J. Mellor

Would it be in Order to move, "That the Chairman do report Progress, and ask leave to sit again"? I wish to move this in view of the absence of the Chancellor of the Exchequer, and in order to enable the Financial Secretary to discuss with him the arguments which have been adduced.

The Deputy-Chairman

I cannot accept that Motion at the present stage of the Debate.

Sir H. Williams

I am frankly disappointed at the speech of the Financial Secretary. The declaration that a pledge by a Minister in one Government is necessarily binding on its successors, is a complete denial of the freedom of the people to express their view at the polls. This is not the kind of issue which, in itself, is likely to be the subject of great speeches at election time, but this conception that a Minister can bind his successor is something that cannot be tolerated. It is a bad principle and a denial of democracy, and I hope we shall not be impressed by that. The declaration merely binds this Government as long as it exists. We have been told that it is going to cease to exist. As soon as it can deal with Hitler, the Government blows up and disperses into its various atoms. It will resign and presumably the King will send for the Prime Minister to form a new Government, and the pledge will not be binding for more than a few weeks, and the fewer the better. We have had a declaration from an hon. Member who belongs to the "Amalgamated Society of Straddlebugs." They are members of the Labour Party who sometimes sit here, and sometimes over there. Two or three of them are Ministers and some are P.P.S's. The hon. Member is still a P.P.S. to one of the backers of the Bill. I presume that, when he gets up at this Box, he is really speaking for the Secretary of State for Scotland.

Mr. Woodburn

No.

Sir H. Williams

Where are we? I do not understand these people who are in two camps at the same time, at one minute leading the Opposition, and at the next a P.P.S. [Interruption.] I do not sit on both sides.

The Deputy-Chairman

I do not think there is anything in the Amendment about P.P.S's.

Sir H. Williams

The Financial Secretary says it will be most inconvenient to put a time limit in the Bill. I wish he had time to look at some of the Statutes. He would find dozens with a time limit. Sometimes it goes so far as to say "This Act shall last for five years and no longer," but that does not prohibit its inclusion in the Expiring Laws Continuance Act. You do not need a one-Clause Bill. It is much simpler than that—one line in the Schedule to the Expiring Laws Act. There is no difficulty and no discussion as a rule, unless for some reason there is opposition to the continuance of an Act. Local authorities will still be free to go to the Public Works Loans Commissioners if the Amendment is carried, and the five years have expired. I think the Minister ought to read the whole Bill and not merely the one Clause to which the Amendment that has been proposed relates. The idea expounded with vigour and eloquence and more heat than light by the hon. Member for West Fife (Mr. Gallacher) that the Amendment is for the purpose of protecting the money of the corporations is completely remote. The sole object of the Amendment is to ensure that at the end of the five years the local authorities will not be prejudiced.

Mr. Gallacher

Is it not the case that it is to allow members of a reactionary local authority, who are associated through their families, directly or indirectly, with financiers who are prepared to provide loans at high rates of interest to take a decision to get a loan? Can the hon. Member tell me that he knows of particular philanthropic institutions which are anxious to supply local authorities with money for nothing, or at a low rate of interest?

3.15 p.m.

Sir H. Williams

I am not suggesting that. I do not belong to what he described as the money-grabbing fraternity and I have never had any connection with lenders of money. I happen to know, however, that a very large number of institutions would, for a variety of reasons, be only too pleased to lend large sums of money, not for long periods but for substantial periods, at rates of interest which are half what is contained in the proposals of the Bill. Therefore, the object which is behind those who are criticising the Bill is to enable people to borrow more cheaply. Of course, the hon. Member for West Fife, who is a great student of other countries, is an expert on rates of interest, and he ought to realise that in the country he admires most the Government's rate of interest is 4 per cent. tax free, equivalent in our case to 8 per cent., as compared with the 3 per cent. at which money is borrowed in this country. When he has cleared up that situation and had more experience, he will be able to advise us how money can be borrowed economically.

I have heard no argument why the Amendment should not be made. It will hamper nobody and the Government will be able to continue the operation of the Bill by one line in the Schedule to the Expiring Laws Bill. As there are a large number of people who are dubious about the Bill as a whole, and certainly about its indefinite continuance, why cannot the Government relieve their anxieties? It will not prejudice the Government and it will not make it possible for any future Chancellor to be charged with breaking a pledge to which he was not a party.

I would ask the Financial Secretary to send for the Chancellor. It is clear that he himself has no authority to accept the Amendment because he did not give a clear and simple answer to the question asked by the hon. Member for Colchester (Mr. Lewis). It is monstrous that the Committee should have to discuss a Bill without the presence of the Minister who alone is able to respond to the arguments, and it is discourteous of the Chancellor not to be here. We know the position of the Financial Secretary; he has his brief and he cannot depart from it without further authority from the Chancellor. I hope, therefore, that if the Chancellor does not turn up when we have finished discussing the Amendment, the Chairman will accept a Motion to report Progress.

Lieut.-Commander Joynson-Hicks (Chichester)

I have not hitherto intervened in the Debate, although I am in favour of the Amendment. There are two matters arising out of the speech of the Financial Secretary which further convince me that the Amendment is correct. We are becoming accustomed to being governed by legislation by regulation, by order and by rule. It is solemnly proposed to-day that we should be governed by legislation by Ministerial assurance, and I feel that my right hon. Friend is put in a false position in having to ask the Committee to accept such a situation. For any Minister to have to back up a Bill in Parliament by asking that Members should rely upon an assurance instead of a straightforward Amendment saddles him with a responsibility which any Minister should be glad to avoid.

The other point about which I feel strongly is that, if my right hon. Friend's argument is carried to its logical conclusion, this is a simple and straightforward bargain between the local authorities and the Treasury with which the Committee is expected to have no concern at all. Because local authorities are satisfied with the assurance which has been offered to them, hon. Members are asked to accept that position and not participate in the consideration of the Measure in any way. I do not feel that that is a correct or proper proceeding. I can see no reason why objection should be taken to the insertion of a time limit. It does not override the assurance that has been given. The Chancellor of the day will still be in a position to review the situation, and will, I imagine, be expected to do so, at the expiration of five years. He will have one year following his review before the provisions of the Bill expire. That will give him ample time to consider what steps may be necessary at the expiration of the fifth year when the Bill comes to an end. That procedure is both beneficial and simple, and it is only right and proper that the Committee should ask the Government to accept it in preference to relying upon a Ministerial assurance.

Mr. Benson (Chesterfield)

I agree with the hon. Member for South Croydon (Sir H. Williams) when he suggested that the Financial Secretary's speech was not quite up to his usual standard. The right hon. Gentleman did talk an awful lot of nonsense. He suggested that, if the Amendment were made and the Bill were limited to five years, as the five years approached their end local authorities would be thrown into chaos in their borrowing relations inasmuch as they would rush in to borrow while money was cheap. That suggestion will not stand examination for a moment. There would still be the Local Loans Fund and the power to borrow there.

Mr. Peake

I really must make it clear that, if Clause 1 of the Bill lapses, the scheme of lending to local authorities at the cheap rates which I announced on Second Reading will also go.

Mr. Benson

Cheap rates will not go unless the Government will it by regulation. In spite of what I have said, I must say that the arguments of the Financial Secretary are a good deal better than those in favour of the Amendment. The amount of heat that has been generated in this matter is extraordinary, because what does the Amendment really mean? It really means that we have pinned out a claim for another Debate on this subject five years hence.

Mr. Colegate

It means far more than staking out a claim for a Debate. It means staking out a claim for the whole of the local authorities that they should not have their financial powers temporarily suspended. That is a much bigger claim.

Mr. Benson

The hon. Gentleman knows perfectly well that, if the Government of the day decide that the Bill should be continued after five years—unless they are defeated on it, which is not likely on a Bill of this kind—it can easily be continued. We have had a pledge that the matter will be considered in four years' time, and we shall get our Debate on that.

Sir J. Lamb

The pledge was that the Chancellor would consult the local authorities, not that we should have a Debate on it.

Mr. Benson

I agree, but the House can get a Debate on this subject any time it feels strongly enough about it. The Amendment merely means that we shall have a Debate five years hence. If the Government think the time has come for the Act to lapse, it will lapse. If the Government do not think so it will not lapse. So the practical effect of carrying the Amendment will be nil.

Mr. Lewis

The Financial Secretary to the Treasury, in response to my challenge, was unable to assure the Committee that he had any authority from the Chancellor to exercise his own judgment whether to accept the Amendment or not after having heard the arguments. There is no one on the Front Bench at this moment who has that authority. The position is that the Financial Secretary is sent to us to-day as a very ornamental and charming rubber stamp. He is to issue the orders of the Chancellor to the Committee, orders issued by him before the Debate has taken place. The Chancellor has no objection to our putting Amendments on the Paper and to our making up arguments in support of them so long as he has not to trouble to listen to them and is not obliged to pay any attention to them. That is treating the Committee with the greatest discourtesy, and I am astonished that any Members of the Committee outside the Government, whether they agree with the Amendment or not, are willing to put up with that treatment.

Sir J. Mellor

In order that the Chancellor may have time in which to be informed of the arguments which have been adduced during this Debate, may I again ask leave to move to report Progress?

The Chairman (Major Milner)

I cannot accept that Motion. The hon. Member has not advanced any adequate ground in support of it.

Sir J. Mellor

The arguments were indicated by my hon. Friend the Member for Colchester (Mr. Lewis). The Financial Secretary has listened very politely to our arguments, but he did not come with any authority from the Chancellor to accept the Amendment if he was impressed by the arguments in support of it. The Chancellor of the Exchequer has just come into the Chamber. It is obviously not possible, in the course of a few whispered comments between him and the Financial Secretary, for the Chancellor to be fully seized of all the arguments which have been advanced in support of the Amendment. I therefore respectfully submit that there are the strongest grounds for reporting Progress.

The Chairman

I cannot accept the Motion. The matter was put to my predecessor only ten minutes or so ago, and I also can see no grounds for it.

Sir J. Mellor

Your predecessor, Major Milner, said that he could not accept it at that stage, and I submit—

The Chairman

The hon. Gentleman is not entitled to argue about my decision.

Mr. Butcher

Very properly, in the exercise of your discretion, Major Milner, you have not accepted the Motion to report Progress. Will you give a Ruling whether we shall be guilty of any breach of the repetition rule if we repeat the arguments so that the Chancellor might be fully informed of the views we hold?

The Chairman

I should think it highly probable.

The Chancellor of the Exchequer (Sir John Anderson)

I am sure the Committee will realise that I am always at its service. I am only sorry that I was not here a little earlier—but I was prevented from being here earlier—to listen to the arguments that have been put forward. I understand that the issue which has been raised is one which attracted attention on Second Reading. The question of a time limit is really, from my point of view, not a matter of principle so much as a matter of convenience. I do not desire, as I think I made clear on Second Reading that these special arrangements, which I think it is generally agreed are, in existing circumstances, to the general advantage, should be continued longer than is necessary.

3.30 p.m.

The difficulty about the time limit is the difficulty we are in, in present circumstances, of not knowing exactly the significance of the time factor. We do not, in fact, know for how long these admittedly special arrangements, which are not designed as a permanent change in our methods of finance, will really be justified. I did think, and I say so quite frankly, having taken those who were directly concerned with this matter, the Associations of Local Authorities, most fully into consultation before the preparation of this Bill, that the absence of a time limit, in view of the assurances that had been given to those Associations and which have been repeated in this House, did not occasion any disquiet. But it is also the case that I have, unfortunately, not been able to be present to hear and weigh up all the arguments that have been put forward. I have said that it is not a matter of vital principle from the point of the Government, and if the Committee would like me to undertake to consider the arguments that have been put forward, I am naturally perfectly willing to do so should the hon. Member, in the interests of the progress of this essential Bill, agree to withdraw his Amendment.

Sir H. Williams

Do I understand from that that the Chancellor means that the Third Reading will not be taken to-day?

Sir J. Anderson

indicated assent.

Sir H. Williams

I will ask the Chancellor to consider then that continuity could be effective by the simple device of the Expiring Laws Continuance Bill, and when I look at the kind of Acts that are continued by that Measure this seems to me just the type to be dealt with in that fashion.

Mr. Douglas (Battersea, North)

If the Chancellor of the Exchequer wishes to take cognisance of the view expressed, I would respectfully suggest that it could be done very simply by making the duration of the regulations, which are the effective instrument under Clause 1, four years and then he could consider, at the end of that time, whether they should be renewed or not.

Sir J. Mellor

In view of the promise which the Chancellor of the Exchequer has given to consider this matter between now and the Report stage, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. Colegate

I beg to move, in page 1, line 8, at end, insert: except in cases where borrowing could be effective on more advantageous terms than those offered by the Commissioners. I wish to make clear to the Committee that this Amendment does not conflict in any way with the purposes of the Bill, but raises a very important point for the local authorities and is one on which I agree with them. It is true that under the scheme proposed by the Bill, local authorities will be able to borrow cheaper money and we are all in favour of that, but before I deal with that, I wish to clear away two misunderstandings which appear to have arisen and were mentioned by the hon. and gallant Member for Stafford (Captain Thorneycroft) a little earlier. Some people seem to have thought that an Amendment of this kind—and it was hinted at on the Second Reading—would affect the orderly approach to the capital market. I can assure Members that if they will read the Bill they will find that this is not the case at all. I am 100 per cent. in favour of an orderly approach to the capital market. That is in operation at the present time, but there is nothing about it in this Bill. That is purely for the Capital Issues Committee. Let me read the words of the Financial Secretary, who said: There will be the Capital Issues Committee which will be concerned with the quite different and very important question of priorities."—[OFFICIAL REPORT, 2nd February, 1945, Vol. 407, c. 1786.] He went on to say that these priorities would be the subject of a full review by the Capital Issues Committee. Therefore if this Amendment is adopted, it will not affect, in any way whatever, the orderly approach to the capital market, because that is going to be settled by the Capital Issues Committee.

It has been rather implied that the local authorities are wholly in agreement with the Chancellor of the Exchequer on this Bill. In a strictly theoretical sense, it is true, but it is not quite true in the practical sense, because what happened was that when the representatives of the local authorities met the Chancellor of the Exchequer on 19th July last, there had been some difference of opinion. The executive of the Rural District Councils Association had passed a resolution that, in their opinion, local authorities should retain the right to borrow loans otherwise than from the Public Loans Board, provided that the rate of interest did not exceed the rate of interest for the time being charged by the Board. Some other authorities were not in agreement with that but their point of view was not put forward. The Chancellor of the Exchequer of course met the executives of these different local authorities' associations, and since that time and since the view of the Rural District Councils Association has become known, many county councils and others have changed their view and many Members have received letters from their local authorities objecting to this. Therefore I do not want the Committee to run away with the idea that all the local authorities are compl[...]ely in agreement with this Bill. I think if it were put now to the local authorities practically every local authority would vote in favour of the Amendment which I am pressing on the Chancellor's attention.

Let me deal with this point. What is the effect of this Amendment? It has two effects, one moral and the other practical. I do not want to repeat myself but I did raise it on a previous Amendment. What we have to realise for the moment is that in this enormous task we must do everything we can to raise the prestige of the local authority in such a way as to attract the very best type of men and women, whose services are so vital. That is one effect—to preserve the rights and the prestige of the local authorities. Now let us turn to the practical effect. It was put neatly by the hon. Member for North Tottenham (Mr. R. C. Morrison) in this way: If they cannot borrow more advantageously, why prohibit them from doing something which it is impossible for them to do? On the other hand, it is clear from the fact that resistance has been shown to the principle advanced, that the Government think that some local authorities could borrow more advantageously than from the Public Works Loan Board.

Let me deal first of all with the word "advantageous." I would ask hon. Members to realise what I mean by it. I do not mean "cheaper," for it is quite true that if you merely use the word "cheaper" you could bring up a case which would be very disadvantageous. I give an example. Suppose a local authority wishes to borrow for 40 years in connection with a long-term project, at the end of which time the project would probably have self liquidated. Then you come along and say: "Let us go to the borrowing market and borrow money at 1⅛ per cent., and at the end of three months you will renew, and so on for 40 years." That is an extremely dangerous gamble. It is very imprudent, and it would not be advantageous because it is a bad thing that long-term projects should be financed by short-term loans, except in very exceptional circumstances. That is why I used the word "advantageous" and not "cheaper" and that is why I am drawing the Chancellor's attention to this point, because if this Clause is amended, as I desire, it would be the Treasury, and to some extent the Capital Issues Committee, which would be deciding what was more advantageous. I would not suggest for a moment that if a local authority is going to borrow imprudently or cheaply, it should be allowed to do so, but I think that the use of the word "advantageous" makes it clear that the Treasury will have ample opportunity of viewing the proposed financial operation as a whole, and then deciding whether or not it would be advantageous.

Sir Frank Sanderson (Ealing)

If there is any agreement with the example that we have just been given, would it not in fact not be "disadvantageous" but rather "inexpedient?"

Mr. Colegate

I will not quarrel with the word "inexpedient" and I will not go into dictionary-making with the hon. Member. If the Chancellor of the Exchequer likes another word—and I hope to find him in a more yielding mood—I am sure we shall be able to agree to that word.

Let us get down to the facts. If we do not take these rights away from the local authorities, we shall not be weakening the general scheme. On the other hand, there is this to be argued. There might be times when the Government would not be able to borrow on such cheap terms as other organisations. In the past, we have had both. Tory and Liberal Governments, who have mismanaged their finances and who have had to borrow at much higher rates than they would otherwise have done. It is by no means certain that it is always going to be possible for the central Government to be able to borrow more cheaply than the local authorities. It was not true in 1930. Then, several of the well managed local authorities of this country were borrowing much cheaper than the Central Government, and especially central Govvernment authorities. An electricity board was borrowing in 1930 at 5½ per cent., yet I know that there were local authorities who were borrowing at 2¾ and 3 per cent. I think as a safeguard we ought to preserve this right, and I do press this Amendment most strongly on the Government. It can do no harm whatever to their scheme. On the other hand, it will preserve the rights which the local authorities value very deeply and it might at one day and at some time be of very great practical importance to them.

3.45 p.m.

Mr. Douglas

The hon. Member for The Wrekin (Mr. Colegate) has, by his speech, completely destroyed the Amendment. In the first place, I do not know how anyone is to interpret the word "advantageous." He himself explained that mere cheapness is not necessarily advantageous, and it seems that whoever would have to make the decision upon this matter, if this Amendment were carried, would have to do so on imponderable considerations which would be very difficult to explain or to defend. Secondly, he has said that he approves of the principle of an orderly approach to the capital market in the circumstances with which we shall be faced immediately succeeding the war. I think everybody must realise the importance of that, in view of the conflicting demands which will be made for very urgent and necessary capital expenditure. If that is so the admission of this exception would cause very serious difficulties indeed.

It is not true that the Capital Issues Committee will control all borrowing by local authorities so long, at any rate, as the Capital Issues Committee continues to function on the principle on which it now operates, namely, that it is not concerned with the borrowing of sums below £10,000. A very large number of these local authority borrowings will be sums less than £10,000 and will not be the concern of the Capital Issues Committee as individual transactions. Therefore, if this Amendment is carried, they will not be canalised through the medium of the Public Works Loan Board, and there will be a multitude of individual transactions taking place, in regard to which it will not only be difficult to determine whether they are individually advantageous or not, but still more difficult to determine whether in total, and in their cumulative effect, they are influencing the capital market in a manner which is disadvantageous both to the local authorities themselves and to the Government, as a borrower of money. I hope that on both these grounds the Chancellor of the Exchequer will not accept this Amendment.

Mr. Spearman (Scarborough and Whitby)

I am sorry to find myself differing from my hon. Friend the Member for The Wrekin (Mr. Colegate), as I am so often in agreement with his views, but I do not think this Amendment would be either fair to the Treasury or, in the long run, favourable to the local authorities. My hon. Friend made rather a point about the Capital Issues Committee being the regulator of new issues and thereby avoiding any fear of a scramble for loans. I can assure him that long before the war it was not possible for local authorities to borrow without permission from the Bank of England, who had a list on which the authorities had to queue up. I can remember going on many occasions to the authorities on behalf of local authorities, to ask for permission, and being told "I am afraid you must wait some weeks," or, in some cases, for some months. In spite of that, although that course certainly ameliorated difficulties, it did not dispose of them. There was very severe congestion in the market, which led to indigestion among the consumers, that is the lenders.

Mr. Colegate

I, too, can remember queueing up at the Bank of England for a very large amount, but my hon. Friend's argument is leaving out of account that it was only in regard to certain classes of issues that the Bank of England had a say. The Capital Issues Committee covers the whole field—Government, private or local authorities.

Mr. Spearman

I quite agree that I was only referring to public issues, but about half the total borrowings of corporations was in the form of public issues. In spite of the orderly method then arranged we did see a scramble for issues, with a bad effect on the money market. My hon. Friend also referred to the very favourable terms on which it was possible for corporations to borrow by means of bills. I am sure he is aware that that was not an option they did exercise to any extent. The total borrowings of local authorities amount to about £1,700,000,000 and the amount in bills is about £1,500,000, that is less than one-tenth of one per cent. I think my hon. Friend is getting that aspect a little out of proportion.

Mr. Colegate

I said that I did not want local authorities to borrow by means of bills. I said they must make long-term loans for long-term projects.

Mr. Spearman

I am very glad to hear that. As to the position in general, I believe that the rates announced last week by the Financial Secretary are very favourable to local authorities. I have made a good many inquiries, and I am satisfied that on balance the rates offered are a little cheaper than what the local authorities could get in the open market. What I think my hon. Friend is really asking for in this Amendment is an option for the local authorities. It is proposed that a local authority, under the protection provided by a firm offer from the Treasury, should be able to go round the market and try to squeeze a fraction of 1 per cent. advantage; that would mean a maximum of disturbance with a minimum of achievement. I would suggest that the real concern of local authorities is not whether they can borrow at 2⅞ per cent. or at 2[...] per cent., but whether they are to borrow at the current rate, or, as after the last war, to borrow at 5, 6 or 7 per cent. That is what matters. I consider that this Measure is of assistance in achieving low rates of interest. I do not want to exaggerate it. I do not think it is a very important weapon in the Treasury's armoury towards achieving low rates of interest, but I think it is a useful weapon. Therefore, I agree that, in the long run, it will benefit not merely the Treasury, but the local authorities themselves. That is why I support it.

Mr. David Eccles (Chippenham)

I wish to support the Amendment. I am curious to hear what the Financial Secretary or the Chancellor has to say which will prove that the Amendment is no good, because in the Financial Secretary's speech when he wound up the Second Reading Debate on this Bill he advanced an argument against allowing the local authorities to borrow outside the Whitehall bank which has no effect upon this Amendment. He said: We do not want them to go elsewhere. There must be some advantage for the Treasury, as well as for local authorities, in this scheme. We do not want foolish and unwise borrowers to go into the market, and spoil it for everybody else, by offering something substantially in excess of these rates."—[OFFICIAL REPORT, 2nd February, 1945; Vol. 407, c. 1788–9.] The voice of monopoly sounds very sweet in the mouth of a Minister of the Crown. That is what my right hon. Friend is asking for—a monopoly. What is the advantage of this monopoly? If it is a public advantage, we should be in favour of it, but we must know what the advantage is. This Amendment will not mean competition in interest rates, which was the only point dealt with in that speech of the right hon. Gentleman, because local authorities, under this Amendment, only seek to borrow more cheaply than at the Treasury rate.

Mr. Spearman

Would my hon. Friend be in favour of withdrawing the promise the Government have given to lend to them at current rates of Government stock? That is a pretty valuable thing which the Government have offered.

Mr. Eccles

I am certainly in favour of that Government offer.

Mr. Spearman

My hon. Friend wants an option against the Government for nothing.

Mr. Eccles

I certainly want an option against the Government, for this reason, that what the Treasury are afraid of is the shortage of savings after the war in relation to the demand for those savings for the whole list of reconstruction projects. They have gone on to say "As savings will not be sufficient in quantity let them all be canalised through the Whitehall bank. In that way we shall collect the greatest quantity, and we shall parcel that quantity out in the fairest way." If that is the Treasury argument it is a bad argument. All our experience shows that when there is a real stringency in one of the factors of production, the best thing is to rope in everybody who can lend a hand, and not to create a monopoly. If the Committee will consider the man-power shortage in the war, how should we have fared without the voluntary services and part-time work given by thousands of women and some men who were not within the net of the Minister of Labour and National Service and the employment exchanges? If the Committee considers the finance of the war, it has been right to have Red Cross collections. If charitable subscriptions had not paid for prisoner-of-war parcels, the taxpayer would have had to pay. We see from our war experience that when things are very short it is worth while in a country like England—

Mr. Messer (Tottenham, South)

Is it not the taxpayer who contributes to these things?

Mr. Eccles

My whole point is that by continuing a system of voluntary payments we have managed to get more money, in a better and more satisfactory way, than if the whole of the Red Cross activities had been financed out of the taxpayers' money. I see so much danger in the shortage of savings after the war that I do not wish to lay aside any method that we may be able to use to attract what may be even—

Mr. Spearman

My hon. Friend is not proposing anything that will increase the number of resources of lenders, but is proposing to create competition among the borrowers.

Mr. Eccles

There are people who prefer to lend money at very low rates of interest to their local authority who do not want to lend it to my right hon. Friend's monopolistic bank in Whitehall. Some of us care more about things that are near to our homes than we do about central government.

Sir F. Sanderson

Can the hon. Gentleman give a single instance in which a local authority has been able to borrow money at less than the rate of the Government credit?

Mr. Eccles

I cannot at the moment give the hon. Member an instance, but as an illustration of my argument may I refer to a firm of well-known engineers in Chippenham who are, at this moment, trying to find ways and means of making a substantial donation to a youth hostel in the town, which they certainly would not do if it was in a town in the North of England? They wish to do it because Chippenham is their town. There are people who lend money for other reasons than interest. It is to give these people a chance that we ought to support this Amendment. I hope it will be accepted as an exception which proves the excellent rule that the Bill is designed to bring into practice.

4.0 p.m.

Mr. Peake

It may be for the general convenience if I state shortly the Government's attitude to this Amendment straight away. Unlike the previous Amendment, which dealt with a matter of expediency, the present Amendment goes to the root of the principle of the Bill. As the hon. Member for Scarborough (Mr. Spearman) pointed out, the Bill has advantages for the local authorities and for the Treasury. It is a balanced Measure. Local authority borrowing is to be canalised, through a central channel, for the convenience not only of local authorities but of His Majesty's Government. On the other hand, local authorities are to get money at the very low rates which I announced in winding up the Debate on the Second Reading, that is to say, at rates varying from 2 per cent. for five-year loans to 3⅛ per cent. for loans as long as 80 years.

That being the case, and there being an advantage in the Bill for each party, it is quite unwarrantable to give to local authorities an option which operates only in their favour. It would be absurd on the one hand to give them the benefit of being able to borrow at what are, in effect, purely Government rates of interest, and at the same time to tell them that they can, if they are so pleased, and can make out a case for something which they think is more to their advantage, go elsewhere. In the case of the quixotic lender, of which I think the hon. Member for West Fife (Mr. Gallacher) is an example because he told us that when he lends money he never charges anything for it, or the Andrew Carnegie of the future who, out of sentiment for his home town, wants to lend them £100,000 without charge, we shall make an exception under Clause 1; but it would be quite unreasonable to give the local authorities an opportunity of borrowing money at Government rates and to say to them, at the same time, that they can hawk round the market and try to pick up any loose money that happens to be there on terms more advantageous than the terms offered by the Public Works Loan Board.

Apart from cutting across the basic principle of the Bill the Amendment would he quite unworkable, because it does not establish any definite criterion. It is not a question of whether money can be obtained more cheaply elsewhere, but of whether the terms are more or less advantageous. Stockbrokers and stockjobbers in the City of London are spending their whole days trying to decide what is, or what is not, more or legs advantageous to their clients. It is a matter purely of opinion. My hon. Friend's Amendment establishes no body of persons who are to judge whether or not a particular course is or is not more advantageous.

Mr. Colegate

There is power to make Regulations on a matter of this kind. It is not so mysterious as all that. The same is true of the rate of interest and the period of the loan.

Mr. Peake

As I have pointed out, apart from cutting across the basic principle of the Bill, the Amendment has not, in my opinion, been thoroughly considered. It establishes a criterion which is a matter of pure opinion, and it does not set up any authority to decide whether one opinion or the other is correct. My hon. Friend referred, as an example of bad and expensive Government borrowing in the past, to the case of the Central Electricity Board. That is not a case of Government borrowing. The Central Electricity Board did not even have a Treasury guarantee. It had no concern whatever with borrowing by His Majesty's Government. For the reasons which I have stated, the Amendment is unacceptable.

Mr. Bowles (Nuneaton)

May I ask one question? Would it not be good to refer to the history of local government borrowing and to remind the Committee of a certain local authority which borrowed from Mr. Clarence Hatry?

Mr. Peake

I was not intending to do that. I was proposing to leave that to my hon. Friend, if he had the opportunity to participate in the Debate. We cannot accept the Amendment, which goes to the very root of our proposals, and I would ask either that my hon. Friend should withdraw it or that the Committee should reject it.

Rear-Admiral Beamish (Lewes)

I intended to make a short speech but I have decided not to do so. I want, however, to ask a question about the words "without the approval of the Treasury." Can the Minister give some sort of undertaking that the approval of the Treasury would not be unreasonably withheld; or has it to be understood that "without the approval of the Treasury" means effectively that no local authority can ever borrow without it?

Mr. Peake

In the Second Reading Debate, my right hon. Friend explained in great detail what the regulations under Clause 1 would contain. There are substantial exceptions to the general prohibition imposed by Clause 1. As regards particular exceptions covered by the words "without the approval of the Treasury," of course I can give my hon. and gallant Friend an assurance that that approval will not be unreasonably with-held.

Mr. Wootton-Davies (Heywood and Radcliffe)

I, too, wanted to say something in this Debate, but will content myself by drawing the attention of my right hon. Friend to the finances of one local authority. We have been talking about interest rates and how municipalities and commercial firms can borrow more cheaply than the Government. Over a long period of years the Lancashire cotton industry was financed by loans much more cheaply than it could borrow from the market. The point has also been raised about municipalities borrowing money at rates cheaper than market rates. The West Lancashire Rural District Council was able to do so, because Lord Sefton lent us £50,000 for 40 years at 2½ per cent., when the Government were paying between 5 per cent. and 6 per cent.

Lieut.-Colonel Dower (Penrith)

I want a little enlightenment on one or two points, because the local authorities in my part of the country are very concerned about this matter. I have heard some people suggest that local authorities are not concerned about it, but they are. I have letters here to prove it. I want to see that my local authority are fully enlightened upon the Government's intentions. It is my intention definitely, whether the Amendment is pressed or not, to enlighten them as to the effects of the Bill. I am not setting myself up as having any special knowledge, but I want information. The first point is whether the interest charged by the Board will be at a fixed percentage, or whether they can increase it. If the latter is the case, the whole argument in favour of the Board having the exclusive right seems to fall to the ground. Now for the second point. I have read the previous Debate. I was not here when it took place and I apologise, but I read it very carefully. My right hon. Friend seemed to say, in column 1788 of HANSARD, that local authorities will not be able to borrow on lower terms than those to be fixed by the Board. That is a very definite statement. I do not want to press the point unduly, but my right hon. Friend should make it perfectly clear whether he stands by that statement or whether it was a natural slip.

I do not wish to be unfair, but local authorities might be able to borrow at various times at a lower rate than the Board has fixed, not through unusual circumstances, or through going to Mr. Clarence Hatry, or anything like that. I want to know whether my right hon. Friend thinks that at any time the local authorities would be able to go to a reputable source and borrow money at a lower rate than the Board will fix. There must come a time when this country will get sick of all these powers at the centre. My hon. Friends on these benches will find that at the election a great many of their supporters will not be in favour of all-powerful executives and officials. If they concentrate more on improving social legislation they will get more support than by giving power to Ministers and officials.

Mr. Bowles

In reply to my hon. and gallant Friend the Member for Penrith (Lieut.-Colonel Dower), may I say that on this question of controls the position of my hon. Friends is quite clear? We do not like controls, but we find them necessary to curb the avarice of private enterprise and private lending. In this Bill, for the first time for some years, the Government say, with a full sense of responsibility, "We are gong to see that the Public Works Loan Commissioners really carry out their public duty of seeing that the best possible terms are available for local authorities who want to borrow money." We have had examples of what happened where this prohibition against their going wild did not exist. I would refer to the case of Hatry, in which we found the Gloucester Corporation, the Newcastle-on-Tyne Corporation, and others all borrowing the same money from the same man, and it was only because he was not able to get enough share certificates ready that he was "rumbled." I am not blaming him, but I am blaming the lack of inquiry which was made by the local authorities. This matter must appeal to us, who are concerned with the public welfare first, and we shall be vigilant to see that the Public Works Loan Commissioners properly carry out their duty of seeing that local authorities get money advanced to them on the most advantageous terms.

Lieut.-Commander Joynson-Hicks

I am sorry that the Financial Secretary intervened when he did, and I ask him to intervene again, in order to reply to a question which I asked on the Second Reading. It is a small point, as to whether those "over-the-counter," or "cash-and-carry" loans, which are made by ratepayers to local authorities in small amounts will come within the exceptions whereby local authorities may borrow outside the Public Works Loan Board. It is a small point, but one of considerable importance to local authorities and people, and one which would obviously fall within the terms of this Amendment. I cannot refrain from commenting upon the monopolistic attitude of the Government in this Debate. They not only insist on a complete monopoly for lending money to local authorities, but they claim a monopoly in financial matters, to the exclusion of everybody else, in every direction.

They make the matter very mysterious, but I cannot see where the mystery lies. On the Second Reading the Financial Secretary said that they did not want local authorities to go elsewhere; but why not? I suggest that the elimination of local authorities from the market will remove a very valuable buffer for the community as a whole, and that it will upset and differentiate against industry. If the Government are satisfied that they can lend at low rates, why should they object to having the check imposed upon them which the opportunity of going to the open market will create? I can see no possible objection to that, and I do not see why the Financial Secretary should be so loath to tell us his reasons. I regret very strongly that he will not consider this Amendment, and I ask him to reply to that one minor point of mine.

4.15 p.m.

Mr. Woodburn

I did not intend to intervene, but the argument which has just been put forward, and which has been advanced before, is very plausible. I think there is a good reason why there should be this financial bottleneck, so to speak, in the case of municipal loans. There is a definite reason for resisting the temptation to allow municipalities to seek cheaper money. Whether that is practicable or not I do not know—I doubt it when I see the interest rates which are mentioned. Some years ago, under the Empire Marketing Board, the farmers and the business men of the Hebrides were given a good marketing scheme. Up to then, they had obtained 9d. a dozen for eggs, but when they were able to form a co-operative marketing scheme the Board were able to offer them 1s. a dozen. Along came the private merchant, and he began to offer this little farmer and that little farmer 1s. 3d. per dozen. So many of the farmers and the farm wives took advantage of that offer that the marketing scheme collapsed, and they were soon back to 9d. or 8d. a dozen. There is a possibility that some financial interests would resent the Government's rates of interest, and would offer an inducement to the local authorities to break away from the co-operative scheme by offering lower rates of interest. That might break down the effort of the Government to provide low rates of interest.

Mr. Colegate

How would it break up the system? It seems to me that it would support it.

Mr. Woodburn

Either the system works, with the local authorities being controlled, or the whole thing is burst up by their being scattered right and left, hunting for money elsewhere. Unless we control the scramble for money we cannot control the interest ring.

Mr. Colegate

Interest is not controlled by this Bill: it is done by competition.

Mr. Woodburn

We have seen what competition for money rates can do. Some local authorities are paying 6 or 7 per cent. for loans because of that system in the past. We can understand that certain financial interests will not like this scheme, because it is going to interfere with what is called—

Mr. Colegate

It has nothing to do with financial interests. I spoke about a resolution passed by the Rural District Councils' Association.

Mr. Woodburn

Even foolish local authorities have to be protected against themselves.

Mr. Colegate

Is that local government and democracy?

Mr. Woodburn

Are they, like the egg wives of the Highlands, to run after everyone who comes along, like a donkey with a carrot in front of his nose? If so, they may destroy the scheme that is there for their benefit. Parliament has to protect not only the local authorities but the people who want houses and those who have to pay the taxes. It is not only the local authorities that are involved, because the great finance to which the hon. Gentleman refers and for which the local authorities will come to the Government is finance for houses. These houses will not be built without considerable subsidies from the Government, which has a direct interest in seeing that the local authorities are not fleeced. I can see no reason why, when that discretion lies in the Treasury, they will go out of their way to make local authorities pay more interest, the burden of which may fall on the Chancellor of the Exchequer himself if he allowed that to happen.

I would like an assurance from the Chancellor or the Financial Secretary that, in the cases where people deposit money with local authorities for convenience, this practice is not barred out under this scheme. I understand that that was what the hon. Member for The Wrekin (Mr. Colegate) referred to in his Second Reading speech—that firms deposited money with local authorities at very low rates of interest. I understood that this will not be ruled out by this Bill. I am also interested in municipal banks, and I had an assurance from the Financial Secretary on Second Reading, but if he has any further statement to make which will give an assurance that these banks are not to be destroyed, or prevented from using local authority money, I shall be very glad to hear from him.

Mr. Loftus (Lowestoft)

I rise only on account of a remark made by my hon. Friend who has just spoken. He referred to certain municipalities owing loans at 7 or 7½ per cent. and he said that was due to the scramble for money. I say that it was not due to that cause, but to the deliberate policy of the financial authorities in this country, the Treasury and the Bank of England, in deflating and raising interest rates until they got the Bank Rate up to 7 per cent., when all interest rates rose. We know that the late Sir Kingsley Wood pledged the Government, and we do not doubt that the pledge will be honoured, to maintain low interest rates after the war, but suppose a future Government resolved, as did the Government after the last war, to enter upon a policy of deflation and deliberately raise interest rates, as has been done before. Suppose, then, that a local authority appeals to the patriotism of its people and says: "We cannot finance houses, and we appeal to the local people to subscribe their money at very low rates of interest." What would happen? Would the Government policy be to encourage that sort of thing?

Mr. Messer (Tottenham, South)

I would not have intervened but for the remarks of the hon. Member for The Wrekin (Mr. Colegate). I have been listening to the Debate and I think the hon. Member's constituency really ought to be pronounced "wrecking."

Mr. Colegate

That is a very old joke, and is not allowed in my constituency. It was banned 10 years ago.

Mr. Messer

The hon. Member said that hon. Members on these benches were opposed to local government. No more absurd statement has ever been made in this House. They realise quite well that the administration of our social services is largely in the hands of local government, and no one could find any people more interested in that administration. What would my hon. Friend's Amendment do? I am speaking as a member of a local authority. We cannot look at this thing from the aspect of one local authority, but have to look at it nationally. If the Government are to carry this thing through properly, they must look at the country as a whole and not allow one local authority to wreck their plan for finance. The short answer is this. We have too long been the victims of disordered finance. There are special circumstances at times which make it possible to borrow at low rates of interest, but, unless this borrowing can be controlled, it is very easy for that low rate of interest to make it impossible for the scheme to work.

I submit, therefore, that the Amendment is very specious. Superficially, it looks good, but we must look at it in the interests of the people as a whole and in the interests of public lending, and I submit that anybody with any public experience at all will agree that what we are wanting is a sound system of finance, not just cheap money at one time to give power that can be used at a later period to increase rates of interest, but an equally recognisable foreseeable period in which one could know what money could be had and could proceed with the work. The anarchy that would result from acceptance of this Amendment would destroy the Government's plan.

Mr. Evelyn Walkden (Doncaster)

I am tempted, in re-reading the Amendment, to answer the hon. Member for The Wrekin (Mr. Colegate) when he accuses us of being anti-local government in our attitude. Those of us who come from ordinary, humble homesteads and have been associated with the local government and well-being of our towns and villages, and with social improvement and development generally, which we have helped to provide, know of the vast mass of experience which has been accumulated and shared with this House. We have given encouragement to many others, who will eventually, possibly, dispossess the hon. Member for The Wrekin of his seat by reason of the knowledge that they will be able to display to the electors at the next election. What we are concerned with is his encouragement of the belief that local authorities will benefit by this Amendment, because they may go into a cheap market. We have had experience of that too, and our experience has been along the lines of the small shops and the big multiple firms. The multiple firms offer goods at low rates at the start, but eventually, when they have gobbled up the little shops, prices go up.

The Deputy-Chairman

This is really too much for me, as it is far beyond the Amendment.

Mr. Walkden

I am trying to show to my hon. Friends how economics work and how this theory actually crushes our people. We believe that the same principles that apply in cases where multiple firms blot out the little man will also apply here to local authorities. For a time there may be cheap money, for a time the local authority will be encouraged to borrow from what they call the free market, but, eventually, it will be discovered that the objective is to wreck the Government's scheme and to force up prices. The price of money will undoubtedly rise as a consequence of this Amendment if it is carried.

Lieut.-Colonel Dower

Surely if that state of affairs occurred, the local authorities would be able to lend money on very generous terms to the Board?

Mr. Walkden

We are concerned with making the scheme secure, safe and sound for the local authorities so that they can estimate exactly at what rate they can get money, and what they can do with it, and precisely what it will cost the citizen. The Amendment leads us in the direction of the position which arose after the last war. Whatever happens in regard to money in the future, citizens are to-day paying in many areas what they never ought to have been paying, as interest on money borrowed years ago. Therefore, the Government's suggestion should remain intact, and there should be security for the local authorities in this matter. We hope that the Government will stand firm with regard to their proposal.

Mr. Peake

May I, in three or four sentences, answer the questions which have been asked by my hon. and gallant Friend the Member for Penrith (Lieut.-Colonel Dower) and my hon. and gallant Friend the Member for Chichester (Lieut.-Commander Joynson-Hicks)? With regard to the former's questions, Penrith and Cockermouth will be able under this Bill to borrow virtually at the same rate as His Majesty's Government. The schedule of rates which I announced in the Second Reading Debate, as I then said and as I now repeat, is not fixed for the currency of the scheme. These rates may have to be adjusted either upwards or downwards during the period of years for which the scheme operates. The question of my hon. and gallant Friend the Member for Chichester with regard to "over the counter" borrowing is the same point we have met with in regard to municipal banks, on which I gave some assurances on the Second Reading Debate. Those assurances will be carried out. The question of precisely how it is to be done is now being examined. The scheme we arrive at will be embodied in the Regulations, and the Regulations, in case of appeal, must be laid before Parliament, so that matter will be settled to the satisfaction of the House.

Amendment negatived.

Mr. Peake

I beg to move, in page 1, line 11, leave out "subsection," and insert "section."

This is purely a drafting Amendment.

Amendment agreed to.

Motion made, and Question proposed, "That the Clause, as amended, stand part of the Bill."

Sir H. Williams

There is power to make regulations under this Clause, and I would like to know when we are likely to see those regulations. Are we likely to see them before the Bill receives the Royal Assent, assuming that it gets through all the rest of the procedure? It is always advisable in order to avoid controversy about the matter that regulations should be published as soon as possible.

Mr. Peake

Perhaps my hon. Friend might raise the question on Clause 7 when we come to the regulations.

Question put, and agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clauses 2 and 3 ordered to stand part of the Bill.