§ (1) Subject to the provisions of this Section, the Public Works Loan Commissioners may advance out of the Local Loans Fund to local authorities within the meaning of the Housing Acts, 1890 to 1919, and on the like security as sums borrowed for the purposes of those Acts, any sums which those authorities have power to borrow for those purposes:
§ Provided that—
- (a) the amount of an advance to any local authority shall not exceed such sum as may be approved by the Treasury and the Minister of Health in that behalf; and
- (b) the amount advanced shall be repaid by the local authority to the Local Loans Fund within a period of twelve months from the date of the advance.
§ (2) Interest on advances under this Section shall be payable at such a rate as the Treasury may from time to time fix or, if the rate applicable to any advance is less than the bank rate for the time being in force, at the bank rate.
§ (3) A local authority to whom an advance has been made under this Section may, without the consent of the Minister of Health, borrow any money required for the purpose of repaying the advance.
§ (4) The power to make advances under this Section shall not be exercised after the thirtieth day of September, nineteen hundred and twenty-one.—[Mr. Baldwin.]
§ Brought up, and read the First time.1198
§ Mr. BALDWIN
I beg to move, "That the Clause be read a Second time."
I ought to give a brief explanation of this Clause to the Committee, and I should like to make it clear, in the first place, that it does not increase by a single penny the amount of money which is at the disposal of the Public Works Loans Commissioners for the ensuing twelve months. Its purpose is to enable temporary advances to be made from the Local Loans Fund to local authorities for housing schemes where a local authority cannot raise the necessary capital immediately. These powers are purely temporary," to meet a condition of affairs which exist at the present time. To show how temporary they are, I may point out that a date is put in, namely, the 30th September next, after which no further loans shall be made. They are not grants, but loans, and the need for them is this: One recognises the necessity of finding work during this winter for out-of-work ex-service men, and there will be cases in which local authorities will be in a position to get on with their building schemes, but will be in immediate need of money, because it takes time, in some circumstances, to make the necessary preparations for a public issue of stock. It is really to afford those local authorities the power of enjoying for a short time an overdraft. Ample security is provided in the matter of repayment. The Sub-sections of the Clause deal with these points, and, having regard to the temporary nature of the difficulty which the Clause is designed to meet, it appeared to me that the Committee would have no objection to inserting it for this year, and this year only, in this particular Bill. I would remind the Committee once more, if the reminder is necessary, that it adds nothing to the amount which is allowed to be lent. Whatever amounts are lent under this Clause will rank as part and parcel of the £40,000,000 which is the limited sum referred to in the main body of the Bill.
§ Sir F. BANBURY
I propose to move an Amendment to this Clause, but I think we must get the Clause read a Second time before I can do that. I should like to ask my right hon. Friend a question. He has told us that nothing in the Clause will enable the Government or the Public Works Loans Commissioners to advance a larger sum than the £40,000,000 which has been put into the 1199 Bill. I may remind him that he told me, I think only yesterday, that, although the sum of £40,000,000 was put into the Bill—that sum having been put into the Act of last year—during last year, instead of £40,000,000, only some £12,000,000 has been spent; and I understood him to say that the balance would accrue this year.
§ Sir F. BANBURY
It may have been my fault. We had rather a hurried conversation, and that is what I thought my right hon. Friend meant. I do not suggest that he told me that it was so, but that is what I understood, and I may have made a mistake. It is now quite clear that the whole of that £40,000,000 will, in all probability, be advanced, and that is rather a large order in view of the state of the national finances. That £40,000,000 has to come from somewhere; it will either have to be borrowed or to be taken out of the sum, if there is any left, which we were told, at the time the Budget was passed, was to be devoted to the redemption of debt or the reduction of the Floating Debt. With all these Bills coming forward one after the other, it seems to me that, when the time comes, we shall find that the surplus has all been eaten up. The Committee ought really to consider whether or not it is advisable to authorise such a very large expenditure. When the Clause has been read a Second time, I propose, as I have said, to move an Amendment to Sub-section (2), and I propose to ask why it is necessary to put in Sub-section (3): but perhaps I had better wait until the Clause has been read a Second time before I raise those questions. Perhaps, in the meantime, my right hon. Friend can give me a short answer as to where he proposes to get the £40,000,000 from, and what the effect will be upon the surplus which was supposed to be devoted to the reduction of debt or of the Floating Debt.
§ Mr. BALDWIN
My right hon. Friend is generally possessed of such knowledge of these matters that I am rather surprised to find that he has slipped into an error on this occasion by showing himself to be not familiar with the working of the Local Loans Fund. I agree that 1200 it is probable that a large amount of this money will be required this year, because of the demand for housing, but in no circumstances can any of the money that is required to be lent from the Local Loans Fund diminish any figures regarding which a calculation has been made in the Budget. The Local Loans Fund is fed in two ways. It is fed by issues to the public and by the continual flow of repayment of loans. My right hon. Friend may have forgotten that, when the issue was made the other day. of. I think, £15,000,000 of local loan stock, that was the first issue that had been made of that particular stock for sixteen years. During that period, the £2,000,000 raised in 1904 and the repayments have been sufficient to carry on the Fund, although I freely admit that the figures before the War were smaller, because in no year did we have to face a large scheme, such as the housing scheme which we have to face to-day. My own impression—I cannot go beyond that at the moment—is that, with the repayments that come in and the issue that has been made, we may hope to be able to find such sums as may be required from the Local Loans Fund during the lifetime of the Bill that we have now before us. Of course, I can give no pledge of that, but I hope and think that it is probable. I think that my right hon. Friend rather exaggerates the gravity of the situation. With regard to Sub-section (3), the reason that we propose to dispense with the consent of the Minister of Health to borrowing for the purpose of repayment of any such advances is that his consent will already have been given to the scheme in the first instance, and we do not consider it necessary to get consent a second time to what is practically the same thing.
§ Sir F. BANBURY
I had forgotten for the moment that there were repayments of loans which went into the Fund, but I had not forgotten that the other source from which the Fund was fed was by borrowing in the open market. That method of proceeding was often, criticised by me in the old days, on the ground that you were depreciating the credit of the Government by borowing for local loans. The security of local loans is practically the same as the security of Government stock, and you were depreciating the security of Government stock by continual 1201 borrowing for local loans. If local authorities want the money they ought to borrow it on their own account. I was aware that that was one of the principal ways in which the Fund was fed. I think my right "hon. Friend has already admitted that the amounts in those days were very much smaller, and the loans, as far as I remember, were made for a longer period than one year. The advances here are only going to be made for one year, and I should like to know whether it may be hoped that the money that is to be lent for one year will come back in one year, and whether it is to be obtained from the taxes or from short loans or Treasury bills. My right hon. Friend says he thinks—although he is not sure—that it will not be necessary to borrow any further money, but that the repayments and the £15,000,000 will be sufficient. Should that not be the case, however, I presume that a permanent loan will not be issued, but that, if any further money is required, as it will only be for a year, it will be obtained by one-year bills. The disadvantage of that, of course, is that it increases the floating debt. I do not know whether I am explaining clearly what I mean. Suppose that the £15,000,000 and the repayments of loans are not sufficient, how does my right hon. Friend propose to find the balance? Is it by a loan in the ordinary way for a certain number of years—I forget how long they generally run, but it is a considerable number of years—or is it by a short loan? Perhaps he can give me a short answer as to that.
§ Mr. BALDWIN
All the money must come out of the Local Loans Fund, which is fed by the methods which I have described, namely, the issue of stock and the repayment of loans. I do not think that this particular form of borrowing can be on any extensive scale; I think that the cases in which it will be required will be very few.
§ Lieut.-Colonel ROYDS
Under the Housing and Town Planning Act passed last year there was power given to the Local Loans Commissioners to advance money for public purposes to private builders. This Clause gives the same people power to lend money to local authorities for building purposes, I think for the first time. Has that power in the Housing and Town Planning Bill been taken advantage of by private builders 1202 to any, and, if so, to what extent? If so, will it be in any way prejudiced by money which is being taken by local authorities interfering with private enterprise, should it wish to go forward?
§ Mr. BALDWIN
I am afraid that is a point for the Minister of Health. I have no information about it, though I can get it.
§ Sir F. BANBURY
I beg to move, in Sub-section (2), to leave out the words" or if the rate applicable to any advance is less than the bank rate for the time being in force, at the bank rate," and to insert instead thereof the words "at a rate not less than the bank rate for the time being in force."
I do not think it is advisable that we should lend money to local authorities at less than the Bank Rate. The local authorities can probably not borrow at less than, even if they could borrow at that rate, and if the State is to provide the money and is to lend to local authorities, I think the rate should be limited in some such manner as I suggest. This is a protection to the Treasury. The Treasury, I feel sure, will have a considerable amount of pressure put upon them by the local authorities to lend this money at a low rate. If they consent, if the Act of Parliament authorises them to do so, and if it has been put that such rate shall not be under the Bank Rate, which is a very reasonable limit to put in, I think it will assist the Treasury in safeguarding the public interest, and will prevent pressure being put upon them to lend money at low rates, which will cause a loss to the Treasury.
§ Mr. BALDWIN
I hope my right hon. Friend will allow me time to look at this, because what he has in mind and what I have in mind are one and the same thing, and I have been advised by my draughtsman that it is not in our power to lend at less than the Bank Rate. If my right hon. Friend will allow me to take advice on the matter I shall be only too pleased to tell him the result of my investigations on the Report stage, and to assure him that the object he has in view is the same that I have in view.
§ Lord HUGH CECIL
Will the Secretary to the Treasury explain the phrase "the rate applicable to any advance"? How is it applicable? What is the meaning of the word "applicable"? I think we should all be able to understand whether my right hon. Friend's Amendment was necessary or not necessary if that were explained to us.
§ Amendment, by leave, withdrawn.
§ Clause added to the Bill.
§ Schedule agreed to.
§ Bill reported, with an Amendment; as amended to be considered To-morrow.