PUBLIC WORKS LOANS BILL. (Hansard, 26 July 1897)

§ MR. HANBURY
moved the Second Reading of this Bill.

§ MR. JOHN DILLON (Mayo, E.)
pointed out that the system of fines for the nonpayment of loans prevailed only in Ireland; and he urged that a clause should be inserted in the Bill repealing the clause of the Act of 1892, establishing those fines, so that the same law might apply to Ireland and Great Britain alike.

§ MR. VESEY KNOX (Londonderry)
said that in England and Scotland almost all the local authorities of any importance were able to issue stock on such favourable terms that the Public Works Loans Commission were unable to do any money-lending business. In Ireland the situation was not quite the same. The borough authorities in Ireland were able to issue stock, and had, therefore, ceased to be customers of the Treasury; but the county authorities, which, in an agricultural country like Ireland, were of more importance, were still unable to issue Stock. That gave rise to the most extraordinary anomaly. The city of Derry, on the security of the city alone had been able to issue stock at 3 per cent.; while the county, which had the security of both county and city, had to go to the Treasury for its loans, and the Treasury insisted on receiving 3½ per cent. for those loans.

§ MR. EDWARD CARSON (Dublin University)
asked whether that included a sinking fund?

§ MR. KNOX
replied that it did not, which, of course, made the matter worse. That was a state of things which ought not to be allowed to continue. The Irish county authorities should either get power to go upon the market and issue stock or receive their loans from the Treasury at the lowest rate allowed by the law. He thought the Chancellor of the Exchequer would see the ridiculous situation in which people were placed, where a city, which was merely part of 1184 an area for an Asylum Board, could borrow at 3 per cent., and the county which included this borough had to borrow of the Treasury at 3½ per cent. There was another point on which he thought they ought to have an assurance. There were many cases in which local authorities in Ireland would be compelled to raise money next year for various purposes. Now those authorities, in all probability, if they wait a year, would prefer to issue stock; and he took it that under the Local Government Board Bill promised next year, county authorities would have power to issue stock. It seemed to him, therefore, that the most economical course would be to borrow from the Treasury for one or two years till the new county authority was in full working, when there should be power to repay the Treasury in whole or in part. He understood there were great difficulties—Local Board difficulties as well as Treasury—in the way of such an arrangement; and he thought if there were such legal difficulties they ought to have a clause inserted in the Bill to enable such an arrangement to be carried out. He thought the Chancellor of the Exchequer would admit that during the transition period—the period that was to elapse before the new local government was established it was only fair that the local authorities should all have this power. If, on the other hand, they borrowed in the ordinary way, they would get the money at par; but when they could pay it, the Treasury would ask from them, as they had asked from the Richmond Asylum Board, an enormous premium of about 13 per cent., which made a loan a very expensive transaction for the local authority. He thought that under the special circumstances of the time in Ireland, when almost as a matter of necessity the local authority would have this power of issuing stock given them by Act of Parliament next Session, they ought to have some provision to meet their requirements until the end of that short period. He hoped the right 1185 hon. Gentleman would not think his demands unreasonable, especially as he was able to announce the satisfactory fact from the Treasury point of view that during the last ten years they had made a considerable profit on this money-lending business, and that he ought to try to meet them on these technical points.

§ MR. T. LOUGH (Islington, W.)
said the first object of the Bill appeared to be to reduce interest. He would suggest that the words in the Bill limiting the rate of interest to 2¾ per cent. should be omitted. Local authorities might borrow now at 2½ per cent., or even less. It seemed to him that the Treasury were taking rather too good care of themselves. The second point appeared to be with regard to the payment which had existed since the Act of 1887. There was a provision in that Act which obliged payment £130,000 to be provided from the Local Loans Fund to make these loans solvent, and now they found that that annual contribution was to cease. Were they to understand that that was not necessary? If it were necessary, how was it to be done without in the future?

§ SIR THOMAS LEA (Londonderry, S.)
said the hon. Member for the city of Derry was in favour of the enforcement of a new asylum for the county he represented, but the county itself was against it. He was informed that they could not get money much under 5 per cent. Why was this new asylum, which was wanted by one-third of the county, and disliked by the other two-thirds, to be built at a prohibitive rate of interest? He understood the Chancellor of the Exchequer was going to reduce the rate of interest, and so far as that went he was grateful to him.

§ *THE CHANCELLOR OF THE EXCHEQUER
said the House must not be too much carried away with the idea that large local bodies could raise their loans now at very cheap rates. His hon. Friend the Member for East Islington, who was a Member of the Finance Committee of the London 1186 County Council, had just told him that the last London County Council loan, for which the security was probably as good security as could be found in England, was raised at £2 14s. per cent.

§ MR. CHARLES HARRISON (Plymouth)
said that it was issued at £2 10s.

MR. B. L. COVEN (Islington, E.)
explained that the expenses of management and the sinking fund brought it up to £.2 13s. 10d., not £2 14s.

§ *THE CHANCELLOR OF THE EXCHEQUER
did not think that he would be justified in reducing the rate of interest named in the Bill, namely, 2¾ per cent. It had never been the. intention of the Treasury to treat Ireland exceptionally. The hon. Member for Derry had referred to the very high rate of interest charged to the county of Derry for a loan in connection with the lunatic asylum. That interest was charged because an old Act fixed the minimum rate of interest for these loans at 3½ per cent., and the Treasury could not go behind that Act. His object in bringing in this Bill was to give the Treasury power to lend money at more reasonable rates. He had every intention of putting Ireland on a level with Great Britain in this matter, and of treating the whole kingdom with equal fairness in respect of the interest charged for loans. The rate of interest mentioned in the first clause of the Bill was in substitution for ten or twelve different rates of interest chargeable under different Acts of Parliament, and varying from 4 per cent. to 3⅛ per cent. In lowering those rates to 2¾ he was surely doing a good deal. Some of the criticisms made that night seemed to indicate that his proposal did not give satisfaction to hon. Gentlemen from Ireland. All he could say was that if it were to be met with any substantial opposition, it would not be possible to pass the Measure in the course of the present Session. In some of the remarks that had been made the process of borrowing and the process of lending were confused. 1187 In order to lend money the Treasury had to borrow it, and the second clause of the Bill dealt with that part of the question. At present the Treasury had to raise money by local loans stock under the Act of 1887, and the money had to be raised for a certain term of years expiring in 19I2, and the dividend payable on the money so raised must be 3 per cent. The clause with regard to the Restitution Annuity was intended to repeal a charge of £130,000 a year on the local loan fund, which would have the benefit of any surplus accruing. This Annuity was instituted in 1887 with a view to providing a fund for the recoupment of the Exchequer for past losses on previous loans, and also loans made under the Act of 1887. He had always felt that it was a little hard to charge loans under the Act of I887 with the losses made on previous loans. The loans made under the Local Loans Act 1887 should be made at such a rate as to keep the local loans fund solvent.

§ MR. T. M. HEALY (Louth, N.)
asked whether in the case of any Acts which fixed a. definite rate of interest for the loan the Chancellor of the Exchequer would be able to extinguish the old loan and lend at a cheaper rate. He believed a pledge was given in the Debate of last year that where in loans to local bodies' a particular rate of interest was charged, there should be power to lower the rate to the standard rate of interest for the United Kingdom. He hoped that, in next year's Bill, the Chancellor of the Exchequer would enable local bodies, if they desired it, to go on the market for their loans.

§ *THE CHANCELLOR OF THE EXCHEQUER
said that legislation would be proposed next year to enable local bodies in Ireland to go into the open market. His right hon. Friend the Chief Secretary would have introduced a Bill on the subject this year, but for the local government proposals for next year. What he said last year had reference solely to future loans. 1188 It was impossible to reduce the rate of interest on existing loans without placing the Local Loans Fund in a deficit, and if the Treasury were to alter past bargains in favour of the ratepayers by lowering the rate of interest agreed to be paid, they would be imposing a very unfair burden on the taxpayer at large.

§ MR. P. A. M'HUGH (Leitrim, N.)
asked whether it would not be possible to extend the period for the payment of this loan, because a very great grievance existed in Ireland with regard to the extraordinary and usurious interest charged on Treasury loans. He had been in communication with the Chief Secretary with regard to a loan to the Sligo Corporation, which was obtained from the Treasury for the purpose of constructing water works. The amount borrowed was £35,000. He had offered on behalf of the Corporation to pay that back, but the Treasury refused to allow it unless it was paid back at a premium of 14. He contended that the Treasury ought to accept 20s. in the £, and allow the Corporation to go into the open market and borrow money at 3 per cent. instead of 5. If they were allowed to do that they would be able to save £1,500 a year. He asked for an assurance that a clause would be inserted in the Bill which would enable the Corporation to pay off the present loan at 20s. in the £. If the right hon. Gentleman did not introduce such a clause he should put down an Amendment himself.

§ DR. TANNER (Cork, Mid)
hoped that some answer would be given to his hon. Friend.

§ *THE CHANCELLOR OF THE EXCHEQUER
said his answer to the question was simply, No. There was no Irish grievance in the matter. The Treasury had been obliged to decline to relieve local authorities from their past bargains both in Great Britain and Ireland. The cases were far more numerous in Great Britain than in Ireland, and in Great Britain the decision had been accepted as perfectly fair.