PUBLIC WORKS LOANS BILL. (Hansard, 8 July 1925)

The FINANCIAL SECRETARY to the TREASURY (Mr. Guinness)
I beg to move, "That the Bill be now read a Second time."
This is an annual Measure, the chief object of which is to fix the maximum amount which is available for works which are financed from this source. This year the Bill fixes the maximum which may be issued at £25,000,000, which is the same figure as was included in the Bill last year. It is a much larger sum than in the years before the War, about four times as large, but it will be realised that we have to meet a heavy expenditure for housing, agricultural credits and other services which did not need finance before the War. This Bill merely regulates the amount which is borrowed from year to year, and does not control the machinery under which the National Debt Commissioners raise the money. The general procedure is laid down in the permanent Statute, the National Debt and Local Loans Act, 1887. That Act provides that the money shall be raised by the National Debt Commissioners in the form of a 3 per cent. stock, and advanced by them to the Public Works Loan Commissioners, who in turn advance it to the local authorities. The scheme has always been self-supporting, and therefore the rate of interest charged to the local authority depends on the real rate at which the National Debt Commissioners can obtain the necessary credit. The question which has been raised on former occasions, of whether it is right to have this stock still on the 3 per cent. basis or whether it should be altered, is of no practical importance, because it is not proposed to make a public issue. The stock is taken up by the various funds which are handled by the National Debt Commissioners.
Apart from this annual provision we have another matter in this Bill which 562 recurs from time to time, for by Clause 3 we are under the necessity to write off, and by Clause 4 to remit as against the Exchequer, irrecoverable principal and interest in the case of a loan under the Housing Acts for the Appleton Sawmills General Utility Society. I do not think the House would have the patience to listen to me if I were to go into the details of this transaction. I shall be glad to answer any points, but the House will find all the details in the White Paper, and it is a common procedure, laid down in the governing Act, that these debts have to be written off. In addition to these annual provisions, there is this year, in Clause 1, a provision which has to be made every five years, and that is for the re-appointment of the Committee which administers this fund.
The Committee consists of men of in-pendent commercial standing, and they have put a great deal of energy into the work which they transact without any payment for administering this Fund. The Commissioners meet every fortnight, and I think they deserve our thanks for the way they have administered this Fund. Under these circumstances, I think we can best recognise their services by appointing them again.

§ Mr. WILLIAM GRAHAM
This is a Bill presented year by year. I think some of us may want to discuss the writing off of this loan to the Appleton Sawmills Company which is mentioned in the Schedule. It is clear that practically the whole of the amount of the loan to this company has been lost. As to the creation of this 3 per cent. stock, I cannot help feeling that criticism is very largely met by the fact that there is no public issue. The important question is whether the Public Works Loans Board really meets the need of as large a number of the local authorities in this country as possible. A year or two ago this matter was investigated by a Committee, and it became perfectly plain that many local authorities did not approach the Public Works Loans Board on the ground that they got more favourable terms in the open market. On the other hand, the small local authorities were often unable to put up the necessary security, and therefore they did not come within the scope of the scheme. It comes to this: that the intermediate local 563 authorities were mainly getting the benefit of these loans. I think it is very important to-day, looking at the schemes that local authorities are to undertake, to ask whether the scheme could be recast in any way, so as to make it apply to as large a number of local authorities in this country as possible. I do not do more at this stage than raise this issue, because it is not proposed in any way to oppose this Bill from this side of the House—[HON. MEMBERS: "Oh! "]—although I daresay a good many questions will be asked; but later I hope the Financial Secretary will be able to tell us what can be done to make the scheme more comprehensive in its scope as regards the classes of local authorities coming within it. That, I think, is the most important part, and, perhaps, the only one on which I, at all events, shall be disposed to ask any questions.

§ Sir FREDRIC WISE
I entirely agree with what the right hon. Gentleman the Member for Central Edinburgh (Mr. W. Graham) has said in regard to this loan. I suppose the present Financial Secretary to the Treasury will guarantee that no issue is made during the present year, 1925, and, if that be the case, I do not oppose it in any way—that is, in regard to the issuing of £100 stock in the neighbourhood of 60 or 62, with 3 per cent. interest; but I sincerely hope that before another year comes the right hon. Gentleman will inquire into this matter clearly, and put it on a sound business basis. In pre-War days these issues were by tender, and I see no reason why a tender at the present lime, even if it be in competion with Treasury bills, should not be undertaken. If the right hon. Gentleman will put these two points before the Committee which is set up under this Bill, I quite think it would be an advisable thing from a financial point of view, and also a benefit to the credit of the country. There is one other point. I am sure the Financial Secretary realises that the interest on these public loans affects many other interests in regard to national services, such as farm loans and things of that sort, which come up in the public accounts. The interest on farm loans is regulated by the interest on these local loans. If the right hon. Gentleman will 564 go into these matters, say in the next few months, it will be of benefit both to the public loans and to the credit of the country.

§ Mr. J. JONES
It has come as a great surprise to me, as one representing a very impecunious neighbourhood in the matter of loans, that private companies can got their loans wiped off, as regards both capital and interest, by an Act of Parliament. We have had to go down on our knees to the Government Department concerned to ask them, at 6 per cent., to let us have the money to relieve the poverty of the people in our own district, and up to now we have been turned down. Within the next fortnight we shall be face to face with bankruptcy, in one of the largest industrial centres in Great Britain. Why cannot we have the same consideration as this private company is going to receive? We do not ask to be relieved of our capital responsibilities; all we ask is a loan, and we are willing to pay 6 per cent. as far as we are able. These people are able to pay and are not going to pay, and we are going to pass an Act to-night giving the right to a private company— [An HON. MEMBER: "A public utility company!"] I say it is a public futility company, because it has failed to meet its responsibilities, and that is futility.
We are a public authority trying to meet our responsibilities. We have 17,000 families every week to Keep from hunger and starvation. We have got to the end of our tether, and come to the Government, and the Government Department tells us that we cannot have the money except under certain circumstances. We say we cannot accept those circumstances without qualification, and yet we have a Bill introduced into this House to-night by the Government to relieve private people of a responsibility which they will not allow a public authority to have the opportunity to assume. We want to know where we are coming in. We are nearly £2,000,000 in debt. Of course, we can afford to owe. There are only two people who can afford to go to law—the man who has more than he knows how to spend, and the man who has nothing. We are simply asking why a Bill like this should be introduced 565 to relieve certain people from responsibilities. Give us the same rights, and we are not prepared to grumble. I would like to ask the right hon. Gentleman who introduced this Bill, is he prepared to treat West Ham as he is treating the Appleton Sawmills Company? The name is rather suspicious to some of us; I do not know whether it came from the Garden of Eden, or where it came from. We should like to know how do we come in. Can we claim 3 per cent. interest as against the 6 per cent. you are charging us? The bank will not allow us any move money without the Government's guarantee. By hook or crook we are going to leave you in the lurch at the finish. In a fortnight from now there will be 17,000 families in the biggest Poor Law area in Great Britain, who will not have a penny piece. What are you going to do with them? Can we have a similar Clause put in a Bill to give us the right to repudiate our responsibilities? Is the Government going to wipe out our loss—£1,800,000 up to the present—as this company is going to be wiped out? Why should a private company get hotter treatment than a public body trying to meet its responsibilities? You have been talking about helping everyone to-night but you will not help us. The Financial Secretary is prepared to answer, but the governor will not let him. I should like to ask if the same principle that is laid down in this Bill is going to be given to us.

§ Mr. HARNEY
I am a little puzzled at this Bill. The big matter in it seems to be the one that was treated by the Under-Secretary as so unimportant as to be unworthy of detailed explanation. I see the Bill, adopting the usual course, has this Clause: Whereas it is expedient that a certain sum shall withdrawn— I was anxious to find out what was the sum that was to be written off so casually. I find that in April, 1921, there was a sum of £1,172 and in June there was a further sum of £687, making altogether £2,129. That sum was advanced by the Government under the Housing of the Working Classes Act, 1890, and the Housing and Town Planning Act. 1919. There were two firms, Appleton Sawmills, Ltd., and Messrs. Remer and 566 Company, which had formed a general utility society. The firms themselves were no doubt perfectly substantial. The utility society was wholly dependent upon its authors. The money was advanced in order to repay these firms what it was alleged they had given this utility company to build houses. The advance, while made, as far as I read the White Paper, to relieve the actual firms who parted with the money was not secured upon any guarantee given by them, but was advanced against this creature of straw, the utility company. The provisions of these Acts are that before such advances are made there should be according to the value substantial security; secondly, that there should be included in the security the subsidy that the Minister was to give to those who built the houses. Theoretically, this sum of £-2,000 was handed over out of the Exchequer to these two strong and solvent firms against the security of the undertaking of this society and as against the subsidy. What we would have expected happened. A year afterwards the Government come to the utility society and say, "You have not paid back the money we advanced." "We have not," says the society, "go and get it." The Exchequer seeks to get it and realises the large sum of £450. Then it turns round and says, "What about the subsidy that we were secured in respect of and that was to come from the Ministry," and they sax, "Subsidy? The subsidy is only payable when the houses are built. The houses are not built. Therefore, you cannot get the subsidy."
In the result, the whole of this money was lost, and this Bill, as I understand it, is a Bill to say: "You, Messrs. Appleton" —I hope there is nobody here connected with the firm. I know nothing about them and I do not mean anything offensive—"and you, Messrs. Remer, who have been out of pocket, and to whom in order that you may be put into pocket we make this advance, shall remain in pocket because the society which we took as security proved to be perfectly worthless." This country, out of taxation, is to pay these two firms for building houses for their own workmen. That is a matter which, to my mind, certainly requires explanation. I may be entirely under a misapprehension as to the facts, because I 567 have had only eight or 10 minutes in which to look through the White Paper, but it certainly seems to me to be a matter which we ought not to allow to go through without some explanation. There is another extraordinary feature, and that is that, although this advance was made in 1921, and the default took place in 1922, we wait until 1925 and then we are. asked to indemnify these firms, not in a bold, straightforward and candid way, but as a sort of sidewind, in a Bill that purports to be an ordinary Bill for reviewing the millions of pounds to be given for national purposes.

§ Mr. BUCHANAN
The first point I want to raise in connection with this Bill is the appointment of the Commissioners for a further five years. The right hon. Gentleman told us they were men of high commercial standing, but I wonder how I, as a public man, can be guaranteed of that fact. One would think that when money was being granted to public authorities, the Commissioners would be men of whom the public would have some knowledge and in whom they would have confidence. I am not going to say that the right hon. Gentleman who moved the Second Reading of the Bill is not actuated by the best of motives, but when he states that these Commissioners are public-spirited men of high standing, he ought, at least, to give us some definite and concrete proof that they are high public-spirited men. I am tired of this business. If a committee were appointed by a Labour Government the Members opposite would ask "what are their qualifications?" We ask exactly the same question as to these gentlemen. What are their qualifications? What know ledge have they of local affairs 2 One would think that on a committee of this kind there would be at least one man who knew local government work and knew its requirements and its difficulties. Can the right hon. Gentleman mention one man on this committee who is intimately acquainted with local givernment and its requirements? Then why is there not a single woman on this committee? Have women no knowledge of matters of this kind. I can imagine that if a Labour Government had proposed a committee of this kind and instead of Anthony de 568 Rothschild had some name like Donald McTavish who was well known as an active labour man, every Member opposite would have protested against this purely party committee being appointed to allocate public funds. Here we have a committee on whom depend the allocation of £25,000,000 and the conditions on which it is to be given and we are not to have a single representative of the Labour movement upon it. It is a purely Tory committee. Every Member is known to be anti-Labour in sentiment. I am surprised that the right hon. Gentleman the Member for Central Edinburgh (Mr. W. Graham) who speaks with so much knowledge and authority on these questions did not protest against a committee like this being set up without at least one-third of its members representing this party. I hope that in Committee we shall be allowed to move Amendments to secure representation for the Labour movement and the working classes generally. It-may be said that we have no commercial experience. No workman can make away with £2,139, and in that sense we may not be commercialists but we know local needs and we know what local work should be carried out. I do not think there is any question that there are men in the Labour movement well qualified to act. I hope that the Second Reading will not be passed unless we get a guarantee that the composition of the. Committee will be extended to include representation of the Labour movement.
A question was raised by the hon. Member for Ilford (Sir F. Wise), who speaks on finance with a great deal of authority. He raised the question of getting this money under better circumstances than those proposed in the Bill. I want to speak of the interest charge. One of the most important features of a Bill of this kind, is not merely that you are setting out to lend money to local authorities, but that the local authorities should get the money on fair terms. Otherwise you may as well not pass the Bill at all. It is peculiar that this private utility company can walk off with ever £2.000 of public money, and yet the Dundee Corporation cannot get a single penny for the purpose of carrying out public work and helping housing. There are no Rothschilds in the great town council of Dundee. Members of that body all have good 569 Scottish names. It is a council of proved business capacity. Yet the Chancellor of the Exchequer and the Scottish Board of Health refused to lend that body a single penny for the starting of public works which would employ men. Why do the Government allow private enterprise to walk away with this public money, and yet refuse a loan to a responsible town council? Take the Post Office Savings Bank. The Chancellor of the Exchequer borrows from the working classes large sums of money through that bank.

§ Mr. SPEAKER
That does not come within the scope of this Bill.

§ Mr. BUCHANAN
There is £25,000,000 involved in this Bill. I was about to point out that this money is found partly from Post Office sources, and that that money, which is obtained at 2½ per cent. interest, ought to be loaned back to the public authorities at the same rate of interest.

§ Mr. SPEAKER
This Bill has nothing to do with the Post Office.

§ Mr. BUCHANAN
I was going to use, as. an illustration, the fact that the Government, through the Post Office, borrow money at 2½ per cent., and the people who are living in the areas of these local authorities lend that money at 2½ per cent., and my request is that the Government, should lend at the same rate as that at which the working class lend their savings. That is a mild request. The Government have charged up to 6½ per cent. and the money in the future should be available at a reasonable rate of interest. In fact I think local authorities in these eases should be allowed to borrow money free of interest, but at the very least they should be able to borrow money at the same rate of interest as money is lent to the Government through the Post Office. We are told that this is a Committee of business men, and yet I notice in the White Paper that they have lent money to this company in Widnes and the ground on which the houses were to be built was found afterwards to be unsuitable for building purposes. If they were a business Committee they should have made inquiries into that matter before lending the money. I hope that in the Committee stage we will have an opportunity of altering the composition of the Committee and unless I get a 570 guarantee to this effect I will go into the lobby against a Bill which seeks to elect for five years a purely rich man's Committee without a single representative of the working classes on it.

§ Mr. TAYLOR
With regard to Clause 4 of the Bill, I ask the Financial Secretary to the Treasury whether he can assure the House that the public utility society referred to is not receiving preferential treatment as compared with other societies. Loans were raised by public utility societies for housing purposes and commitments were entered into when building costs were very high, and ail over the country the societies running these schemes were placed in difficulties after the phase of credit restriction began. If I am in order in referring to the loans obtained by local authorities for housing from the Public Works Loans Commissioners under the 1919 Act. I would like to point out an apparent difference and inconsistency in the treatment of private enterprise by the Government as compared with their treatment of certain local authorities. During the time of the Coalition Government of fragrant memory, in which the Conservative party was, I believe, the dominant partner, they insisted that local authorities in various parts of the country should take up large loans for the purpose of carrying out their housing duties. On a great deal of that money local authorities have now to find 6 per cent. and 6¼ per cent. interest. In at least one specific case that I know of a loan of £750,000 was raised by a local authority on the express instructions of the Government. When the Geddes Committee put a stop to building, after the Addison scheme, between £300,000 and £400,000 of that loan had not been expended for the purposes of housing, but in the particular areas there had developed widespread unemployment, and the Government were asked whether this loan could be used for the purpose of financing relief works. The Government consented, but when it came to calculating the grant payable to the local authority, instead of paying it on the basis of the 6 or 6¼ per cent. which the authority had to pay for the loan, they calculated the rate of grant at 4¾ per cent., and the difference in that rate of interest was put upon the local rates. In the case of my own constituency a dif- 571 ference of between £5 and £6 in the grant was taken by the Government.

§ Mr. SPEAKER
How does the hon. Member connect that with the Local Loans Fund?

§ Mr. TAYLOR
I was trying to argue that there was this difference of treatment as between what is proposed in Clause 4 in relation to the public utility societies and the treatment of local authorities which had raised loans under the Public Works Loan Commissioners for the purposes of housing. I suggest that we are entitled to a guarantee from the Government that there has been no particular favouritism shown to a particular public utility society, and, if I may say so with respect, I think we are in order in raising grievances of the character I have indicated, when the Government are seeking to get the Second Reading of a Bill of this kind.

§ Mr. STEPHEN
I wish to ask the Financial Secretary to the Treasury whether the individual who paid the £450 for the two houses that were roofed in has now completed the six houses in connection therewith, and who was the person who took over this evidently bad bargain? I have a sort of suspicion that possibly those six houses have since been built and a subsidy paid to the individual who paid the £500 in connection with those six houses. I would also like more information with regard to the appointment of those Commissioners, as to what is exactly the principle upon which the Treasury have gone in their selection. I can quite well understand that the Treasury should look for so much business and commercial experience, but it would appear to me, in the short time that I have had to examine it, that, as my hon. Friend the Member for Gorbals (Mr. Buchanan) said, some individuals representing knowledge of the work of local authorities might also be quite well included among the Commissioners, as well as some representing more distinctly the working classes of the community. I would like a little information from the Financial Secretary before we agree to the Second Reading of the Bill

§ Major CRAWFURD
I would like to put a simple question to the Financial Secretary. These appointments are, I presume, unpaid.

Mr. GUINNESS
I said so.

§ Major CRAWFURD
In the first Clause we are asked to renew for five years the appointment of people who have carried out this particular transaction. Obviously, this particular transaction was carried out without any view to security. The question I want to ask is, whether there are similar cases, or whether an exception has been made in this particular case?

Mr. GUINNESS
I can, of course, speak only by leave of the House. If I may say so, most of the points raised can be more conveniently dealt with in Committee, but, if only out of courtesy to the House, I will indicate in outline the answers to the various points which have been raised. The right hon. Gentleman the Member for Central Edinburgh (Mr. W. Graham) pointed out the importance of giving the greatest possible assistance to the small local authorities in furnishing them with credit from the Local Loans Fund. The right hon. Gentleman himself served on a committee which inquired into this subject, and their recommendations have been in all cases, I believe, adopted. It is quit? true that certain local authorities have not been able to set the advances which we should like to give them, but there are limits to the amount which this Fund can provide. We do not want to make a public issue, and we merely have at our disposal sums which, in the ordinary course, come under the management of the National Debt Commission, and, therefore, a selective process has to be adopted, and the normal procedure is to limit these advances to local authorities in this country which have a rateable value of not more than £200,000, and to those in Scotland where they have a gross value of £250,000. There are exceptions The first claim on the Fund locally goes to the borough or district council up to one-half the net proceeds of the National Savings Certificates issued during the previous 12 months in that district, regardless of the rateable value.
The point has been raised as to the difficulty of the county councils, and we have lately come to an arrangement, that where the local authorities which I have mentioned do not absorb the whole of the available half proceeds for their own purposes, the balance can be transferred to the county councils. The hon. Member for Silvertown (Mr. J. Jones) suggested 573 that we were giving to certain favoured borrowers better terms than could be enjoyed by the large local authorities. I think he is in a very natural confusion, if I may say so, between the basis on which under Statute we are obliged to issue this stock and the actual interest which has to be demanded from the local authorities. The money is raised by means of an issue of stock by the National Debt Commissioners, and they are bound to issue on a 3 per cent. basis.

§ Sir F. WISE
Why?

Mr. GUINNESS
Because they are bound by Statute.

§ Sir F. WISE
Can that not be altered?

Mr. GUINNESS
Yes, Parliament can alter the Statute, but the annual Act does not deal with it. The annual Act merely lays down the maximum which can be advanced by the Public Works Loan Commissioners. The procedure under which the National Debt Commissioners obtain their funds in advance is laid down in the Local Loans Act of 1887. In Section 8 of that Act, there is detailed regulation as to how the necessary money may be raised on a 3 per cent. basis. The money, having been raised, is reissued by the Public Works Loans Commissioners. At the present time the money is lent at 4¾ per cent. and it actually costs the National Debt Commissioners 4.7 per cent. So the hon. Member for Ilford will see that there is only a margin of .05 per cent. to cover the cost of administration.

§ Sir F. WISE
May I interrupt my right hon. Friend one moment? My point is that it is practically irredeemable.

Mr. GUINNESS
It would cost the country a considerable sum of money to issue the stock on a redeemable basis. The. payments by the borrowers are provided for at the same time according to the length of the loans, and each transaction has to be liquidated without any loss to the fund. That is why it has been laid down by this House that the difference between issue and the cost of buying stock has to be provided by all public utility companies or the Local Authority to anticipate the normal period for which the loan has been lent.

§ Sir F. WISE
But are not Local Loans practically irredeemable?

Mr. GUINNESS
Where a loan is taken up by the Post Office Savings Bank or the Trustee Savings Bank, arrangements may be made by the National Debt Commissioners, who have many functions, among which is the management of the Local Loans stock, whereby the stock may be realised. It is argued that it will be better to issue it at a price near par, but at the present time there is no question of that It is a matter on which arguments can be raised on both sides. There is a great of public loan stock still in the market. It is not within the scope of the Bill to interfere with the standing arrangements laid down in the Statute of 1887. The hon. and learned Member for South Shields (Mr. Harney) has understood this White Paper to mean that an advance—

§ Mr. STEPHEN
We here want to hear as well.

Mr. GUINNESS
If the hon. Member for Camlachie (Mr. Stephen) would like to know, I will explain to him briefly that these two companies which got into difficulties and could not continue to make their contributions to the public utility societies did not get any repayment of the moneys which they had advanced. The amount which was advanced by the Public Works Loans Commissioners was limited and laid down by the Housing and Town Planning Act, 1919. It is not fair for the House to blame them, considering that the House laid it down that public utility societies were to be entitled to borrow money for the purpose of housing up to 75 per cent. of the purchase price of the land and the cost of its development.

§ Mr. J. JONES
Did not the people who are responsible for the utility company receive the money directly from the Government.

Mr. GUINNESS
Certainly not. The White Paper says they advanced £l,796 to the utility company, and that money was lost, because the Government had a prior lien, and when, as the hon. Member for Lincoln (Mr. Taylor) tells us so often happens, the scheme got into difficulties owing to the sudden fall in the price of building, the money which had been advanced to the public utility society by the two firms concerned was absolutely lost.

§ Mr. JONES
Were not the two firms the utility society?

Mr. GUINNESS
No, they formed the public utility society, and, unfortunately, they were not able to continue to contribute to it.

§ Major CRAWFURD
The right hon. Gentlemen himself has just said the two firms formed the public utility society. They got the loan as a public utility society, the thing does not succeed, and they are let off the loan.

Mr. GUINNESS
I do not think that is so. If I used the words "they formed a public utility society" I was guilty of an inaccuracy, because I think the public, utility society was formed by the members of it, and the members of it were the employés of the firms.

§ Mr. JONES
One Member of this House is mentioned in that connection.

Mr. GUINNESS
I do not know what reason the hon. Member has for saying that, or what he infers.

§ Mr. JONES
I am not inferring anything.

Mr. GUINNESS
This is a matter which can better be dealt with in Committee, and I shall be glad to get the information. I cannot tell who it was that bought this land, or what he has done with it, but if we can trace the information I shall be glad to give it. The only other point is as to how the Public Works Loans Commissioners have been selected. They were appointed many years ago by Parliament, and when vacancies have occurred from time to time the places have been filled up. At the present time we are only asking the House, as has been the custom in the past, to reappoint these gentlemen, who have, as we believe, done their work efficiently, under the obligation laid upon them by Parliament to advance money to public utility societies. The small loss that has been made on this particular transaction is no reflection at all upon the Commissioners. They are not-called upon to justify in any way the methods of the public utility societies.

§ Mr. STEPHEN
The right hon. Gentleman has not told us anything at all about 576 the way in which these gentlemen are selected.