HC Deb 21 June 1906 vol 159 cc434-49

Order for consideration, as amended, read.

Motion made, and Question proposed, "That the Bill, as amended, be now considered."

MR. RAWLINSON (Cambridge University)

said that in moving that this Bill should be considered upon that day three months, he had no desire to interfere with nor had he any hostility to the municipal enterprise of the London County Council. But he thought it was only right that, in the public interest, an explanation should be given to the House of Commons of the expenditure of the London County Council whenever they came to the House, as in this instance, for Parliamentary sanction for loans on an exceedingly large scale. In the case of any ordinary borough or city, where sanction for loans had to be obtained, it was necessary to have a local inquiry presided over by a representative of the Local Government Board. But, in the case of the London County Council, the House of Commons was put in the position of the inspector of the Local Government Board. He thought it would be admitted that there was some grounds for inquiry into, or at any rate, explanation of, the growing increase in the indebtedness of the London County Council. When the London County Council succeeded the Metropolitan Board of Works in 1889 their indebtedness was about £17,000,000. In dealing with the London County Council finance, there I were two heads which had to be considered—money borrowed for their own purposes, and money borrowed for the purpose of re-lending it to subsidiary authorities. He wanted to deal now only with the money which the London County Council had borrowed for their own purposes. As he had said, when the London County Council succeeded the Metropolitan Board of Works their indebtedness was £17,000,000. Ten years afterwards it had increased to £21,000,000; but by 1905 it had attained to the vast amount of £44,000,000. He was not for a moment posing as a person who would take up a strong position on one side or the other. What he wanted was that some explanation should be given to the House of this extraordinary increase. He found that the original estimate for the building of Vauxhall Bridge was £484,000, and that the revised estimate was £535,000, or a difference of £50,000. He would like to know whether that revised estimate meant the total cost of the bridge, or if there was an additional sum yet to be paid? Again, the original estimate of the cost of the Strand improvements was £4,800,000, while the actual cost was £5,186,000. What was the explanation of these large miscalculations? Was it the fact, that after certain people had received compensation, it was found that their buildings would not be required owing to changes in the original plan? He would like to know why the large island area facing the Strand was not put into the market, and was only used for temporary purposes by the Salvation Army. There seemed to be a lack of proper organisation and foresight in regard to these Strand improvements. There were other two items which demanded particular notice. The first was the river steamboat service. The original estimate of the cost was £280 000, the revised estimate was £304,000, while the loss on the service last year was £51,000. He wanted to know whether it was intended to carry on that steamboat service in the winter as well as in the summer. To a very indirect extent he was interested in this matter, because he once invested £100 in a steamboat company which the London. County Council had run off the river. He had not sustained a very substantial loss, because he had never expected a dividend, but he should very much like, from a business point of view, to know whether the London County Council were going to run a winter service at a prospective loss of £50,000. Then there was the question of the tramways. A very large loan was being asked for for the extension of the tramways, and he wished the hon. Gentleman who represented the London County Council would give the House some explanation of this large additional expenditure. Was it the fact that the London County Council, in carrying a large amount to the reserve fund of the tramway enterprise, were acting in direct opposition to the recommendations of their Finance Committee? In view of the steamboat enterprise not turning out so well as the County Council anticipated, was that body justified in being so optimistic about the taking over of the northern system of tramways and asking sanction for exceedingly large loans in connection with it? He attached great weight to this question of increased municipal expenditure at the present time. The harsh incidence of taxation caused not only suffering among people with fixed incomes and small professional men, but the removal of industries from London to other places where the rates were less. They were now asked to sanction a very large sum of money for the building of a great county hall on the other side of Westminster Bridge—a very expensive quarter. Surely that was a luxury which might very well be deferred for a few years. He moved that the Bill be considered that day three months.

MR. R. DUNCAN (Lanarkshire, Govan)

seconded the Amendment. He said that no doubt in regard to the administration of large centres of population we were moving towards socialism of some kind or another, but the services which were rendered by bodies like the London County Council had some dangerous aspects. They had in fact their dark shadow as well as their bright side. He would not say a word in condemnation of the river service and other schemes which had been carried out by the London County Council, but that body must not train our people to think that they were born with a large silver spoon in their mouth, but should encourage self-reliance, energy and individual enterprise.

Amendment proposed— To leave out the word 'now,' and at the end of the Question to add the words 'upon this day three months.'"—(Mr. Rawlinson.)

Question proposed, "That the word 'now' stand part of the Question."

MR. WOOD (Glasgow, St. Rollox)

said he gathered from the hon. Member for Cambridge University that he did not intend to press this Amendment to a division. If he did it would be a most unusual course in regard to a Money Bill of the London County Council, having regard to the peculiar position in which London County Council finance stood under the Standing Orders of Parliament. If the Bill were lost there would be chaos in the municipal administration of London, but he understood the hon. Member would not press his Motion, but was rather desirous of being reassured. There was nothing from which the County Council suffered more than financial criticism without knowledge. There was a general vague impression that the Council was responsible for every rise in the rates. The rates of the County Council ten years ago were 1s. 3d. in the £; they were in the current year 1s. 5d. in the £. That increase of 2d. was not enormous, considering that the County Council had inherited from the Metropolitan Board of Works great arrears of work which had to be carried out in the interests of the health and welfare of Londoners.

MR. RAWLINSON

said he was not referring to the 1s. 3d. and the 1s. 5d.; the more important aspect of the matter was that the County Council had raised the rateable value of London, and he was referring to the actual amount of rates.

Mr. WOOD

said that that increase in the rateable value argued that great improvements had taken place, and that much new property had been created. But, of course, the creation of new property carried with it increased obligations, and the Council had had to extend their main drainage system, and fire brigade. A much more serious thing for the citizens than the increase in rates was the increase in rents. In accounting for the rise of rates he had first of all to point out that they suffered from a serious falling off in the surplus from the Exchequer contributions available for reducing rates. About fourteen or fifteen years ago the London County Council was able to apply from the Exchequer grants £290,000 in relief of rates. Since then the gross amount had increased very slightly, but the duties placed on the Council of paying money out of these grants for statutory purposes had so increased that they were now only able to apply £30,000. That accounted for¾d. out of the 2d. It was not increase of expenditure but diminution of receipts. These grants were expected to be a very important and growing relief to local rates when first sanctioned by Parliament, but the Royal Commission on Local Taxation which reported some time ago admitted in the frankest manner that London had been very unfairly treated in this matter. He had accounted for ¾d. The next item to which he would like to allude was the large Strand improvement that had been undertaken by the London County Council at the desire of the people of London and at the urgent request of the Party to which the hon. Member opposite belonged. He remembered Lord Rosebery once saying that the policy of the Party opposite was to lower the rates and to widen the Strand. Those were two things that could not be accomplished by one operation. The cost of the Strand and the Westminster improvements, which was a temporary charge, had added to the debt of London £6,250,000, and the service of the debt this year cost London £175,000, or about 1d. rate. Then there was the case of the steam-boats, which had cost a farthing rate. Main drainage had also cost a good deal, and the increase of the fire brigade, largely caused by the disastrous fires in the City of London, cost another halfpenny. So that he had accounted for more than the 2d., which had been the rise in the rates on the last ten years. The hon. Member for Cambridge University said that in 1899 their debt was only £21,000,000, and that it was now £44,000,000, but he had forgotten to mention to the House that Parliament had placed on the Council the responsibility for the education of London, and with that had placed on their shoulders the old School Board debt of £11,500,000. That was a substantial figure which he thought ought in common justice to be mentioned, but which in political controversy was frequently ignored. With regard to Vauxhall Bridge, he was informed that the figure mentioned in the Bill would not be exceeded. He was not surprised that some explanation had been asked for with regard to the Strand improvement, but the answer was a very simple one. There had been no increase in the expenditure, and the amount now asked for was not to pay greater compensation. It was a bookkeeping item. The Clare market scheme and the Strand improvement were dealt with nearly at the same time. The County Council had intended to re-house a number of the people who were displaced by the improvement on the Clare Market area. But it was eventually found desirable to re-house them elsewhere, and the cost of the land no longer required for this purpose had been added to the cost of the improvement. It was a mere book-keeping entry which required them to deal with it in this way, and the change had resulted in a saving of money. The property for the Strand improvement had been acquired within the estimate of the County Council's valuer, which was made at the beginning of the undertaking. With regard to the steamboats, he trusted they would not be run during the winter months. They had had some experience of running a few during last winter, and it was obvious that the traffic was more or less a summer traffic. There was, however, one important fact to be noticed with regard to the steamboat service. In the first place, all the witnesses before the Committee were perfectly clear in saying they did not expect the business to be carried on without loss during the first few years. Several of them thought it would ultimately be carried on at a profit, and time alone could prove whether their anticipations would be realised. Another curious thing was that they had never brought forward a project that was so strongly supported by the borough councils of London. They came forward one after the other and said they wished the project carried out; that they were prepared to pay their share of the loss; that they hoped it would not be much, but that they thought the service would be well worth a rate of a farthing or a halfpenny. So far the loss had been about a farthing. The traffic had improved. They had carried 240,000 passengers in Whit week, and had been carrying between 45,000 and 90,000 passengers a week during the last two months. Not only had the County Council the support of the borough councils, but they had the support of the entire Press without regard to politics. They were urged to take this step by the entire Press of London. He would give only one example. The St. James's Gazette, not an advocate of municipal trading, had thus exhorted them— That great neglected highway lies within a stone's throw of Spring Gardens. Let the London County Council neglect it no longer. At present they are neglecting not only the river but their duty. Mr. Hayes Fisher, the late Member for Fulham, gave evidence in favour of the scheme, as well as the present Member for Hammersmith. It was not a Party undertaking. It was undertaken with the full admission of the County Council that they did not expect any immediate financial profit. With regard to the new County Hall, he might say that at the present moment the County Council was housed in nearly thirty different buildings, and he put it to any practical business man whether that was not a spendthrift and unsatisfactory way of conducting public business. They could have no control over it, and it led to an enormous waste of time. They were building on the other side of the Thames not a palace but a workshop, and they thought it right that they should provide a workshop which was efficient and in which work could be done without waste of time and without extravagance. The hon. Member had said the tramways were a debatable point. He could not understand how anybody could look at the London tramways without seeing that London had in them an extremely valuable asset, and that the investment from the point of view of the ratepayers was an extremely profitable one. The small actual balance was no adequate test during a period of reconstruction, when miles of horse-tramways were being relaid for electric traction and traffic was dislocated. But they might take another test. They found as they changed from horse to electric traction the number of their passengers increased, and that the earning powers of the trams increased in a large measure. They had reckoned that if they got 1s. a car per mile it would be a profitable return, because the expense of hiring electric power from a company was 8d., which left 4d. for the payment of interest and sinking fund. They further estimated that when the station at Greenwich was complete the cost of electric power would be about 7d., and that station was now working. As a matter of fact, the expense of the electricity from a company had been a little less than 8d., and the receipts had been a little above 1s., and their margin for the interest and the sinking fund had averaged 4½d. instead of 4d. During the last two years the actual results had been better than they estimated by about £30,000 a year. He protested against the practice of looking at municipal finance without having regard to sinking fund. The sinking fund contained the money laid by for the redemption of debt. In the case of the tramways the greater part of the debt would be redeemed in twenty-five years, and supposing they made no profits but merely sufficient to keep up the interest out of revenue, while laying by the necessary amount for renewals, they had a sinking fund which would create a very valuable property for London in the future. They had already laid by £450,000. But they were doing better than that. He would like to call attention to a comparison made between the returns of municipal undertakings and those of private companies. That was of course taking the two accounts on the same basis. In the case of the London County Council southern tramways for the year ending March 31st, 1905, the capital expenditure was £2,600,000, and the profit on working was £203,000, the percentage of profit to capital expenditure being over 7½ per cent. The London United Tramways Company for the year ending December, 1904, with a capital expenditure of £2,900,000, made a profit of £120,000, or a percentage of 4.1 per cent. The amount placed to reserve and depreciation accounts was £66,600 in the case of the Council trams, against £5,000 by the London United Tramways. At that time the Council were not generating their own electricity. To show the profitableness of electric traction as compared with horse traction he might inform the House that from Greenwich to the bridges in the last complete year of horse traction the receipts were £98,490; the 1905 receipts, under electric traction, were £169,000. The passengers carried were 23,000,000 in the former period, and in the latter 37,000,000. They looked to the number of persons carried as much as to the receipts. They embarked on these enterprises not solely to make money for the ratepayers, but to provide services for them which would not be provided by private enterprise. In the case of private ventures, routes which were immediately profitable must be chosen; but the London County Council could have regard to the development of traffic as affecting the housing of the people and the business interests of the town. They had tried to serve not one class, but all classes of the community. The people of London must become accustomed to large figures, for London had the population of a province and the wealth of a kingdom. They were bound to see that the resources of their great city were wisely and economically, but not stingily, administered.

SIR F. BANBURY

said he had previously understood that the profits of municipal trading were to go in the relief of rates. He now understood from the hon. Gentleman it was not so, but that it was a kind of philanthropic enterprise.

MR. WOOD

said the hon. Gentleman was not accurately representing what he said. He mentioned distinctly that they were very willing to make profits, but that they regarded municipal enterprise as having further reaching and more important effects.

SIR F. BANBURY

said he now gathered that profit was a consideration, but only a secondary one. He agreed that if the Amendment were carried the result would be chaos in London county finance, and for that reason he trusted it would not be pressed to a division. He would have liked to move that some of the clauses should be referred back to the Committee, for they had a far-reaching financial effect. They were not clauses connected in any way with the administration of the expenditure of the London County Council. He was raising the question merely in the interests of sound finance. He objected to Clause 4 because it provided not for one year's expenditure, but for expenditure for eighteen months. He contended that the estimates of the London County Council submitted to the House should be framed for one year, and not for eighteen months, in order that the House might retain its control. There was no magic in eighteen months, and if the principle were admitted it might easily be said that authority should be obtained for two or three years. A very serious point was raised in regard to Clause 15 because it allowed the provision for the redemption of the Sinking Fund to be abolished. [Cries of "No."] Then what did it mean? Perhaps the hon. Gentleman would explain.

MR. WOOD

It certainly does not mean that.

SIR F. BANBURY

said it meant the use of the money which had been put by for the Sinking Fund. Was not that correct? The hon. Gentleman did not answer. That being correct, then, it meant the use of money put by for the Sinking Fund, and that was the worst possible thing that could be done in finance; the Sinking Fund should be kept as a sacred trust for a certain purpose. It was not new, it had been done by other municipalities. The next point was one in connection with Clause 17, where practically dividend was allowed to be paid out of capital. That was a mistake when applied to companies, and led to reckless finance, but to give such power to a municipality like the London County Council was sheer madness. Why should they use to pay interest money which they had borrowed? Their duty was to pay interest out of the revenue they raised. He had put three extremely important points, which he was quite certain could not be answered.

MR. DICKINSON

said he rose to reply to the three points put by the last speaker. But first he wished to express satisfaction that the subject of London finance should form the basis of a discussion in this House. He believed that nothing but good could come of it. At a time when municipal expenditure was becoming more and more important it was as well that they should understand the methods that had been adopted by a body which was unique in the excellence of its financial arrangements, under the guidance of some of the most eminent servants of the State. The points raised by the hon. Member had again and again been considered, not only by the council, but by this House, guided by the views of the Treasury. On all questions of loans the Treasury had something to say. The answer to the question why the Council asked power to borrow for eighteen months was apparent on the face of the schedule. That schedule gave the amounts to be authorised and stated that the estimates were required for the twelve months ending March 31st, 1907, and that an additional sum was required to carry on to September 30th. Unless the latter authority were given all the powers of the Council of capital expenditure would expire in March next before Parliament would have had the opportunity of renewing them by passing the Annual Money Act in June or July, and the Council's work would thus come to a temporary standstill. The next point raised had relation to a matter which also had Treasury sanction. The debt was not repayable until sixty years after borrowing, and the earliest payment would be in 1929. In order to prevent the piling up of a great fund of money for repaying the stockholders, it was thought well that use should be made of the accumulating fund to make short loans to various London public bodies, conditions being strictly laid down, in the clause, for repayment of the whole before the money became due to stockholders. This course might be open to the theoretical objection that the money for the stockholders was not in the Council's coffers at the particular moment, but it was there so far as London as a whole was concerned, and the borough councils and the boards of guardians were solvent. Therefore the stockholders were perfectly secure, as the money would be back again in the Council's hands before it was required for redemption. The third point raised by the hon. Member was that permission was given in certain conditions to pay interest out of capital. He was not sure this was the case in the Bill they were discussing, although he knew that the Council were anxious to be allowed to do what many companies had done in the initial stages of a great undertaking. This plan was eminently suitable for municipal operations. One of the cases in which the council realised the necessity for such a plan was the Strand-Holborn improvement. An enormous amount of money had to be borrowed for the purchase of land which in a very short time was going to be let off on long leases, and it appeared to be perfectly fair that the ratepayers in the first year or two should not be called upon to pay very large interest while waiting for the time when the property would become remunerative. Those were all the points raised by the hon. Baronet, and he was grateful to him and the hon. Member for the University of Cambridge for having brought these points forward and having afforded him an opportunity of placing these facts before the House.

MR. BRIDGEMAN (Shropshire, Oswestry)

thought they were entitled to ask for a little more information. It had been said that this Bill dealt with a quest on of national importance and that it dealt with the finances of a kingdom. He thought an hour's discussion of a question of such magnitude was a very short time indeed. He did not find fault with the aims and aspirations of hon. Members who represented the London County Council, but the question was: How far would the experiments that had been tried do harm, although they were intended to do good? He thought an increase of 2d. in the county council rate was considerable, having regard to the increased rateable value, and they had not received a satisfactory reply in regard to the increase of the debt. They had been told that the London County Council had the advantage of retired officials from the Treasury to guide them in questions of finance. That was perfectly true, but was it true that the council had listened to the advice which some of those gentlemen had given? He knew that the Council had received one or two warnings from the present Chairman of the Finance Committee. He thought the increase in the rates was very severe, and would have a considerable tendency in the direction of driving people out of London. [An HON. MEMBER: "Whose rates?"] He was referring to the London County Council rates. He did not complain that the rates were going up on account of education, but an increase in the London County Council rate of 2d. was a heavy increase when they took into account the enormous increase in the rateable value. The accusation that the Council had made rash estimates of their expenditure had been denied, but why was it that they had asked in this Bill for more than half a million of money to make good deficiencies in estimates? He should have thought that it would have been possible to bring the estimates nearer the mark than that. With regard to the tramways, he wished to know what proportion of the expenses of street widenings was charged to the tramway account. That was a point which he thought they required some enlightenment upon. In the earlier part of the Bill it was proposed to empower the Council to construct and equip new tramways, institute certain street improvements, purchase land, and spend money for these and other purposes. Money was spent on the widening of streets where tramways were made, and he wanted to know how that money was accounted for in the tramways account. He fancied that the streets widening account of the London County Council last year amounted to something like £4,000,000, but that did not affect his argument, whatever the figure might be. He understood that the County Council professed to charge one-third of the cost of street widening to the tramways account. He asked how much of the salaries of the staff were charged to the tramways account. He was glad to hear that the County Council did not propose to continue the service of steam boats next winter. He should like to get some further information in regard to the finance of the new offices. The hon. Member for the St. Rollox division had said that the County Council were housed at present in thirty different buildings. Were they to understand that accommodation would be provided in the new premises for the whole of the staff now housed in these thirty buildings? If so, his objection to the new building would be entirely removed.

MR. BAKER (Finsbury, E.)

said it might interest the House to know that hitherto the amount paid on the basis of one-third of the cost of street widening on account of tramways had been in respect of streets where not a single tramway car had yet been run. The amount involved on capital account was already about £100,000, and the amount paid out in advance for interest and sinking fund charges was between £10,000 and £12,000. Last year, £6,000 was charged to the tramways account as interest and sinking fund charges on capital for street widening in respect of streets where probably no car would run for the next six months. He asked the House to take note of the fact that while the tramways account was charged with the cost of laying down and maintaining the pavement between the tracks and eighteen inches on each side, the electric tramways did not involve the use of the pavement in the slightest degree. There were no horses' hoofs to wear out the paving. On the other hand they provided cars which carried seventy passengers, that being double the number carried by a motor omnibus. In doing so they removed from the actual street traffic 50 per cent. of the vehicles that would otherwise be required to carry the same number of passengers. As to the question of the contribution of the County Council to the reduction of the rates, some interesting tables had been prepared by the Council's comptroller. Hitherto the amount contributed by the profits of the County Council was no less than £293,000, and that was after paying interest and providing a sinking fund, under which the whole cost of the buildings and lines would be paid in twenty-five years, and also after providing a reserve fund of over £100,000. £607,000 had also been paid out of profits in reduction of debt. The House might be perfectly assured that the County Council finance was on the soundest basis.

MR. VICTOR CAVENDISH (Derbyshire, W.)

said the points raised by his hon. friends had been most admirably met by the hon. Members who had spoken for the London County Council. He wished to have further information in regard to the item of £32,000 referred to in Section 34 of the schedule. He expressed surprise that no representative of the Treasury was present. He understood that the President of the Local Government Board was present not so much as a representative of the Government but as a proud parent looking with admiration on the healthy appetite of his offspring. In view of the fact that many of these proposals must come before the Treasury for approval it was unfortunate that the Chancellor of the Exchequer was not present. They might have been favoured with a discourse such as they were able to have the pleasure of reading in the papers that morning from the Chancellor of the Exchequer on the evils of municipal borrowing, and it would have been interesting to the House if instead of making that speech elsewhere he had reserved it for the present important debate. He should have liked to know the view of the Chancellor of the Exchequer upon this Bill. This was an important matter from the point of view of the London ratepayers, and also from the point of view of national finance, for the London County Council would have to go into the market from time to time to borrow. He hoped his hon. friend would not press the Amendment.

MR. STRAUS (Tower Hamlets, Mile End)

said he rose to correct a misapprehension that seemed to exist owing to a remark made by the hon. Member for the City. There was nothing in this Bill to enable the London County Council to pay interest out of capital, although if the Council were a public company, there was no doubt that they would have asked for this power. Railway companies were invariably allowed to pay interest out of capital during construction. Section 17 of the Bill which was the section referred to by the hon. Member for St. Pancras, and which was exectly the same as in the Council's former money Bills, empowered the Council when it issued a loan to pay out of the proceeds thereof interest on the new stock for the period prior to the receipts of the cash instalments of the loan. That extra interest was, of course, taken into consideration by those applying for the stock, and a higher price was realised. There was no doubt that the finance of the London County Council was on a perfectly sound basis; it was stronger and more secure than that of any public company and would bear the most careful and minute examination.

MR. RAWLINSON

said he was absolutely satisfied with the explanation which had been given and he asked leave to withdraw his Amendment.

Amendment, by leave, withdrawn.

Main Question put, and agreed to. Bill, as Amended, considered.

Ordered, That Standing Orders 223 and 243 be suspended, and that the Bill be now read the third time.—(The Chairman of Ways and Means.)

Bill accordingly read the third time, and passed.

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