[BILL 123.] SECOND READING. (Hansard, 13 May 1875)

§ THE CHANCELLOR OF THE EXCHEQUER
, in moving that the Bill be now read a second time, said, it consisted of a good many clauses, but was yet a simple measure, the main object of which was to alter the mode in which local authorities were now empowered to contract loans. Those authorities had powers given them by Acts of Parliament to contract loans for certain purposes. Some of those Acts were local Acts authorizing a particular borough or body to borrow money for specific purposes; others gave powers generally to all bodies under Bills like the Public Health Bill or the Artizans Dwellings Bill. The powers so given were subject to certain provisions. For example, the bodies thus borrowing were bound to go 606 to the Treasury or the Local Government Board, or in certain cases to the Home Office, and show that they had authority to borrow; that they had not exhausted that authority; and that they had complied with all the statutory provisions in regard to the new loan they were proposing to contract. Then they were authorized by the proper Department to go into the market and contract the loan. Sometimes they obtained the money from the Public Works Loan Commissioners; but in the great majority of cases they obtained it in the open market. But they were obliged to borrow by rather a cumbrous process. There must be mortgage deeds, and considerable legal expenses had to be incurred; while the lenders of the money were, to a certain extent, bound to see not only to its application, but he believed also to the observance by the authorities of the provisions of the law as to the keeping up of a sinking fund, and other matters of that sort. Again, if any person who had lent money to those bodies wished to realize a part or the whole of his advance he could only do it by a transfer of the mortgage—an expensive and troublesome business. On the other hand, the authority that wished to contract additional loans must do so by the issue of new securities and by means of a new mortgage; and after all those new arrangements were not as public as it was desirable they should be. Complaint was justly made of the cumbrousness of their present system of Local Government. They found themselves embarrassed by the action of so many different Boards, each possessing powers which it exercised without reference to the others. Unnecessary delay and confusion arose, the various bodies were hampered, and the natural effect of all that was to raise the rate of interest against them. The provisions of the present Bill were simply these:—That for the future local authorities proposing to borrow should borrow by a system of debentures, to be issued for not less than £10 or more than £1,000 each; and that those debentures should be presented to the Local Government Board to be stamped. Before stamping them the Local Government Board would ascertain whether the local body had authority to raise the money and had complied with all the statutory provisions, and on finding that it was entitled to 607 borrow a certain sum, say £1,000, a debenture to that amount would be stamped. It was hoped that those debentures would pass easily from hand to hand, and be a very marketable security. The local body would at the same time register the debentures, and the effect of that would be that after a time there would exist at the central office a complete registry of their liability. That would enable persons who wished to lend to ascertain the exact amount of the indebtedness of the borrowing body. The 13th clause of the Bill also provided that the accounts should be sent to the Government, and that there should likewise be an audit of the accounts of the local authority once a year in such manner as the Local Government Board might from time to time direct. The object of that was to secure the proper and due appropriation of the monies raised by loan to the purposes for which the parties were authorized to borrow it. He did not propose to go so far as to introduce a Government audit of the general accounts of local authorities. That was a step which he thought would be rather too strong for the House to take. A Committee which sat last year, under the presidency of his hon. Friend the Member for Leicestershire (Mr. Pell), inquired into that subject, and came to the conclusion that it would not be possible for the Government to attempt to institute an audit in the case of local expenditure generally. But with regard to that class of expenditure which would be provided for out of loans, which was specially authorized by Act of Parliament, and which would be more or less supervised by the Government, as, for instance, in the matter of stamping those debentures, it appeared to him to be both just and right that there should be a proper audit of the application of that money, and also of other money applied to the same works. For example, in the case of the construction of a sewer, the audit ought not only to extend to the money which might be borrowed for the making of the sewer, but also to any money raised from the rates for the same purpose.

MR. HUBBARD
remarked that "power to borrow" was the text of this Bill, and of a great many other Bills which came before them; but he thought that before the power to borrow was encouraged and facilitated, some provision should be made to secure the means of repayment. He regretted that ever this Bill came before them to facilitate the powers of borrowing, while the one Bill—the Valuation Bill—which ought to be brought forward, was never introduced. Until that Bill became law, none of the local authorities were certain as to where they were to find the means of repaying the loans which they made. He urged upon the Government to be less eager in putting forward these borrowing Bills, and to bring in without delay the Bill which must, sooner or later, come before them; and, in the absence of which, introducing such a Bill as the one under consideration, was like putting the cart before the horse. He confessed that he disliked the proposition that local authorities should establish a sinking fund. What guarantee was there that these local authority sinking funds, all over the country, would be treated with more respect than the great national sinking funds which had existed in former years, and which had been exploded one after another? He saw in the introduction of this system very great danger; and he thought it worthy of consideration, whether the example of foreign Powers, which extinguish their obligations by making them redeemable by drawing, should not be followed. He objected to the continuance of this process of loans, until the basis of valuation was settled, and the conditions fixed, on which the rates were to be levied, by which these loans were to be ultimately repaid.

§ MR. COLLINS
said, he thought the principles contained in the Bill must commend themselves to the consideration of the House. The fact of the exercise of borrowing powers being sanctioned by the authority of the Government, and the Government audit of the accounts would be productive of great good. It was proposed that debentures to be issued under this Act should be stamped by the Local Government Board. He congratulated the Chancellor of the Exchequer upon the introduction of this practical measure to give increased confidence to investors in those local se- 609 curities without entailing any charge or liability on the State beyond the supervision of the accounts of local bodies affected by the provisions of this Bill. He dissented from the views of the preceding speaker respecting encouragement of the application of sinking funds by local authorities. It was very desirable to fix a period for repayment or amortization of all such loans; and as the Bill provided for the employment of several modes of effecting this object, he hoped it would meet with support from both sides of the House. There was one point of importance to be considered, and that was, whether there should be any maximum rate of interest prescribed beyond which the sanction of the Government should not be given. That, however, was a point to be considered in Committee; and, meantime, he cordially supported the Motion for the second reading of the Bill.

§ THE CHANCELLOR OF THE EXCHEQUER
said, there would be no limitation of interest.

§ MR. WHITWELL
said, that the sanction of the Government could not alter the nature of any legal contract into which local authorities might enter for advances on the security of rates. There was no doubt that it would enable them to obtain these advances on more reasonable terms. The question of audit, and its limitation, ought to receive careful consideration.

§ MR. CHILDERS
said, he thought the Bill, so far as its general tenour went, was one which might be adopted by Parliament. He questioned, however, the advisability of extending these facilities for issuing bonds transferable by delivery down to local bodies of the standing of Poor Law Guardians. Again, he could not conceive anything more dangerous than that trustees under wills and settlements—considering the amount of property in their hands, and the extent of modern trusts, should be enabled, where not expressly forbidden, to invest in the debentures of any local Governing Body. He almost doubted the wisdom of some of the past relaxations of this character, but he thought the Court of Chancery would be horrified if they found that, under the plea of facilitating the issue of local loans, any trustees who might invest in the debentures of a particular Body, were to be at liberty to take the debentures of any local Govern- 610 ing Body. He trusted the Government would, before going into Committee, consider how that clause could be altered. Then, he understood his right hon. Friend to say that the Government would be empowered to appoint auditors for examining the accounts of local authorities, in so far as those accounts related to moneys borrowed under their special Acts and the present Act, but not in respect of their general financial powers. Now, the distinction here proposed to be made would, he believed, be found very inconvenient, if not altogether unworkable, in practice, and he hoped the Bill would be amended in that respect. In addition to that, he strongly urged that the auditing of those accounts should not be handed over to casual officials, but should be conducted under the authority and responsibility of the Audit Department, established under the Act of 1866. With the exception of the points he had referred to, he supported the Bill.

§ MR. SCLATER-BOOTH
said, the right hon. Gentleman (Mr. Hubbard) seemed to think that this Bill was premature, because no Valuation Bill had been introduced by the present Government; but, if there was any ground for complaint, it was that such a measure had not been submitted to Parliament many years ago, because very serious burdens for executing public works had been imposed upon local bodies, whilst assistance in obtaining money had not in all cases been afforded to them, such as had been given in the case of the Sanitary Act and the Education Act. As to the indebtedness of the local authorities, no doubt it was large—amounting to about £84,000,000—but large as that sum was, it was not excessive, in view of the rateable value of property that had to be set against it. Great advantage had been obtained by the metropolis, from the cheaper means which had been afforded for borrowing money by the Metropolitan Board, and by the smaller bodies through them, and it was but fair that other parts of England should have a similar advantage. With regard to a Valuation Bill, that could be nothing more than a reforming and re-easting of the present system, under which the present assessment committees did the work. He did not think, therefore, that his right hon. Friend was open to the charge of putting the cart before the 611 horse, while he thought that the local authorities had reason to complain that such a Bill as that now before the House had not been brought in years ago.