§ Order for Third Reading read.
§ Motion made, and Question proposed," That the Bill be now read the Third time."
§ Mr. WATT
I beg to move, to leave out the words, "now read the third time," and to add instead thereof the words "re-committed to a Committee of the Whole House in respect of Clause 1."
926 I am one of four Members who have put a notice on the Paper to move the recommittal of the Bill in respect of Clause 1. It may be said against us that we are rather late in the day in dealing with this measure, but the excuse I have to offer for it is that the measure was brought in only on the 18th February, and copies of it could not be got by the local authorities, at any rate in Scotland, and, I think, all over the country, until after 5th March. Therefore, the representations that have been made to us by local authorities are, perhaps, somewhat belated, and have led to this line of action in the House. The idea we have in suggesting the recommittal of this measure is that local authorities' securities may be put in the Bill on the same footing as Government securities. No doubt it is an admirable Bill with a very good purpose—to safeguard the investments of trustee savings banks. As the House no doubt is aware, these savings banks have been in the habit in the past of lending their money to local authorities and to School Boards in Scotland at long-dated repayment. Owing to the advantage of investing in War Loans, a run has been made on these savings banks. In the future these banks are to be allowed to lend on Government security for three years, but in the case of other institutions only one year, and with only six months' notice. The idea which I have in view is that the local authorities' securities may be put on precisely the same footing as the Government securities, and in particular that the School Board securities in Scotland shall be put on that same basis. The School Board credit is remarkably good, because there is no limit to the rates which School Boards can put on people in Scotland, and therefore the security is the security of the public in general. Therefore, it is a good security, and, to my thinking, it should be placed on the same footing in this measure as a Government security. I need hardly say that School Boards and other institutions of that type will be greatly harassed by the fact that they will not have this method of getting money in the future as they have in the past. This will deprive them of a source of loan, namely, the savings banks, and they are of opinion that their securities ought to be treated in a favourable way by this measure. We therefore suggest in Committee, if this Motion is carried, an Amendment in Clause 1, alter the words "Government securi- 927 ties," to insert the words "or Local Government securities." I do not know whether my hon. Friend the Secretary to the Treasury will be in a frame of mind now to accept this Amendment or a similar Amendment. An Amendment on similar lines was suggested in Committee by my right hon. Friend the Member for Kirkcaldy (Sir H. Dalziel), but without success. Since then representations have been made to me, and I hope to the Secretary to the Treasury. If so, I hope he is in a different frame of mind now.
§ Mr. PRINGLE
I beg to second the Amendment.
I do not think I need add anything to the considerations which my hon. Friend has put before the House. The restrictions placed upon local authorities in respect of borrowing under this Bill have aroused a considerable amount of disquiet among certain local authorities, particularly in Scotland. On the Committee stage expression was given to that feeling by my right hon. Friend the Member for Kirkcaldy, and since then other local authorities, who before had not been aware of the precise effect of the provision of this Bill, had their attention called to it, and are anxious that their position in relation to these banks should not be prejudiced. Under the Bill a privileged position is given to Government securities. It is felt by these local authorities that, as they have the security of the rates, borrowing by them from these banks is in a position of equal security to borrowing from the Central Government, and they think that the privileged position granted to the Central Government should equally be extended to local authorities. I hope that the Amendment which my hon. Friend has suggested may be found acceptable to the Government. If it is, the position will be made absolutely clear, and I do not think that there need be any concern, so far as the objects of the Bill arise, that those objects will be prejudiced if the Amendment which my hon. Friend suggests is accepted.
§ Mr. BALDWIN (Joint Financial Secretary to the Treasury)
I hope I can explain in a few words the exact position in such a manner as will satisfy the hon. Members from Scotland that the Clause as it stands is a necessary and integral part of the Bill in the form in which it is drafted, and that there is no intention either of impugning the credit of the local authorities 928 or of placing Government stock in any preferential position. The whole object of this Bill is to safeguard the special investing departments of trustee savings banks, these special departments having themselves, in the early stages of the War, experienced difficulty owing to the fact that they had locked up their money in precisely the form of security which my hon. Friends 'are now asking me to leave available for them all the same shape. The House must remember that depositors have a right of calling their money in, and they are not obliged to give longer notice than one month. I ask the House also to remember the great difference between these banks and what we ordinarily understand by banks. There are in these cases no large amounts of liquid assets over and above the investments of the bank which, are available for a sudden run, nor is there any uncalled capital. These banks are deprived of the great safeguards of the ordinary banking system of this country. A Committee was appointed to examine into the affairs into the banks and to make representation. That Committee decided to advise the Government that the terms of repayment should not be three years, even for Government securities, but only one, and the reason why three years was put in the Bill was not to give preference to Government securities as such, but because the trustee savings banks felt that they were almost too cramped in the range of investments open to them, and they pleaded that if the term were extended for Government securities to three years it would admit, as time went on, of the investment in Exchequer Bonds, which would be useful as a backbone to their investment fund. We gave way on that point.
But I would remind my hon. Friend that there is a very easy way out of the difficulty, so far as the local authorities of Scotland or anywhere else are concerned. The last words in this Clause permit investors to lend sums for any period, provided that notice can be given for repayment at any time in six months. That reserve amount of liquidity would be absolutely essential to the solvency of these funds, and it rests with the local authorities, if they wish to keep this opportunity to themselves, to make an agreement by which they can consent to the money being repayable at six months' notice. I pointed out on the Committee stage of this Bill that this would be no hardship for the local authorities, for the 929 very reason that this type of borrowing was the fairest type of borrowing for the special investment department, because they could probably get a slightly better rate of interest from the local authorities than from any other source, and it would give them every inducement both to lend and to hold money on a notice of six months. They would naturally be pleased to lend the money, because they would get the best return. But in the event of their being a run on their bank it is essential that they should have this right, because if they were allowed to lock up their funds in local securities that were not fairly promptly redeemable they would not then have sufficient liquid assets to be able to redeem them in time to meet any trouble that might be impending in a very short time. I am afraid that this Clause as it stands is of the very essence of this Bill, which has been drafted in agreement with the trustee savings banks for the sole object of maintaining their solvency against any contingency that can be foreseen. With this explanation, and in these circumstances, I hope my hon. Friends from Scotland will be satisfied and will allow the Bill to have its Third Reading to-night.
§ Amendment, by leave, withdrawn.
§ Main Question put, and agreed to. Bill read the third time, and passed.
§ The remaining Orders were read, and postponed.