PUBLIC WORKS LOANS BILL. (Hansard, 20 July 1925)

§ Major CRAWFURD
This is a Measure which nobody would desire to prevent passing, for nobody in any quarter of the House would desire to prevent the provision for the issue of loans to public bodies under the circumstances provided in this Bill. Nor, so far as I am concerned, do I object to the re-appointment of the Commissioners, whom I gather are, under Clause 1, to be appointed for the period of five years. When this Measure, however, was before the House on Second Reading one or two hon. Members, and myself, drew attention to one of the provisions which I think does require some elucidation and explanation before the Bill is finally passed. That is an item which is referred to in Clause 4 and which concerns the writing-off of over £2,000 which had been advanced to certain people to set up a public utility society, and whose undertaking was not very successful.
The point I wish to raise—and I shall be very glad if the Financial Secretary to the Treasury sees his way to deal with the matter—is, of course, brought up quite clearly in the White Paper which has been issued, and which can be 1980 obtained at the Vote Office. Briefly, the point is this: that two companies set up a Public Utility Society for the purpose of building houses for their employés. They were advanced money. The undertaking was not successful—was unsuccessful, so that, although the sum of £2,024 was advanced by the Public Works Loans Commissioners to these two companies, the undertaking, in respect of which the money was advanced, was ultimately sold for £450. This House is now, under the provisions of this Bill, asked to agree to the writing-off of a sum equal to £2,024 Certain questions obviously arise. I do not, of course, cast any reflection upon the Commissioners. It does, however, seem to me to require explanation that after a sum of £1,372 had been advanced in April, 1921, that two months later a further sum of £670 was advanced in respect of works which eventually are knocked down for over £400. We ate entitled to know what measures are taken to see that there is adequate security when public money is advanced in this way.
The second point is this—and I shall be glad if an answer can be given: Have similar sums of public money been advanced in respect to undertakings which have not fulfilled the anticipations of the promoters, and which, in fact, have been carried out at a financial loss? If so, is it the invariable custom to come to this House and ask for consent to the writing-off of a sum of this kind; and if it is not, why has this particular case been selected to be treated in an exceptional manner?
The third point is that this particular undertaking, which was formed to erect houses which, it appears, were only partially erected, was sold for £450. I think we are entitled to ask to whom the sale was made, and what has become of the property since. Without wishing to make the slightest reflection on or charge against anybody, I think those are questions which, in the interests of the administration of public money, ought to be asked and require to be answered, especially as this transaction has been included in a Bill the main object of which has nothing to do with this transaction.

§ Sir H. CAUTLEY
Before this Bill gets a Third Reading, may I ask the Financial Secretary to the Treasury to tell me how these Public Works Loans 1981 Commissioners work in deciding as to loans and, more particularly, as to the rate of interest? These Commissioners are responsible for all loans made to cooperative societies for agricultural purposes, for loans to farmers who bought their farms, and for a number of other public utility purposes. Are they entirely independent of the Treasury in deciding whether an advance is to be made and as to the rate of interest, or are they subject to the direction of the Treasury. In my experience a great deal of the utility of the legislation we pass concerned with loans has been spoiled by the arbitrary methods adopted by the Commissioners, and by their high rates of interest.

The FINANCIAL SECRETARY to the TREASURY (Mr. Guinness)
The hon. Member for West Walthamstow (Major Crawfurd) has again drawn attention to the unfortunate transaction concerning the sum of money which was advanced in the Appleton Sawmills case and very naturally asks for an assurance that this kind of loss will not be repeated. The circumstances under which these advances were made were that under the Housing and Town Planning Act, 1919, Parliament deliberately, in Clause 22, suspended the safeguards which had been put in former Statutes to prevent money being advanced by the Public Works Loans Commissioners to such schemes as this without adequate security. It was a deliberate action on the part of the House of Commons, and was, no doubt, an outcome of the great housing shortage and the desire to secure more houses. That system terminated in December, 1922, and loans are no longer made under the Treasury regulations which were issued to meet the exceptional circumstances of the 1919 Act. The ordinary rules are now re-applied, and though advances may be made while building is going on they can only be made up to the value of the work actually done, as ascertained to the satisfaction of the Commissioners. I think the hon. Member may rest assured that under the amended Regulations there is very little danger of a repetition of this transaction.

§ Major CRAWFURD
Will the right hon. Gentleman answer my specific question, as to whether there are similar cases of this kind occurring, perhaps, in the 1982 period he has mentioned, and if this is the normal treatment in cases of this kind.

Mr. GUINNESS
It is the perfectly normal treatment when a loss has occurred. It is written off in this way, and if the hon. Member will go into the matter, he will find continual cases of this kind. I hope there will be no more cases of this particular sort, but if there be they must be brought forward under the Statute. The hon. and gallant Member also asked how this disappointing sale was negotiated. The property was first put up to auction, and the best bid was £350. I think it was wisely withdrawn and an effort made to get a better bid. The best offer them made privately was £450. What happened to the property since I have not been able to trace, but I have no doubt that the best was done. The hon. Member does not, perhaps, realise how this loss occurred. The two companies were both wound up, and therefore the houses which would have been warranted had these buildings gone an were not likely to find tenants. The hon. Member for East Grinstead (Sir H. Cautley) asked about the finance of the Public Works Loans Commissioners, and why they charged rates which in some cases ho thought interfered with the utility of the loans which they made. It is laid down in the Statutes that they have to advance these loans under Treasury Regulations so as to be self-supporting. The Public Works Loans Commissioners had to re-lend that money at a rate which would recover the interest and the sinking fund. At the present time the average rate is 4¾ per cent., and the rate at which the National Debt Commissioners are raising this money is 4.7 per cent., so that there is not so much margin.