HC Deb 23 February 1927 vol 202 cc1806-25

Order for Second Reading react.


I beg to move, "That the Bill be now read a Second time."

This Bill is one with which the House is quite familiar in its general principle. It is an annual Bill, and the House is aware that it is part of the machinery by which a very large amount of the local finance of the country is carried on. There are from time to time some particular features occasioned by the particular circumstances of the moment. The amount authorised to be lent varies, and there are sometimes other exceptional features. The amount which has been put into the Public Works Loans Bill, as the House is probably aware, is very much larger in these days than it used to be in pre-War days, and the main reason why a very much larger sum has been necessary has been the very large commitment on behalf of housing. Last year, the figure that appeared in this Bill was £35,000,000. The sum which is being asked for for the same purpose to-day is £40,000,000, and I think it is right that I should explain the difference between those two figures. The fact is that that £35,000,000 was, owing to the exigencies of the time, barely sufficient to carry us through until the end of the present financial year. It was found that during the first eight or nine months of the year the amount required was so high that, without conserving our resources to a certain extent, it would run out before the end of the year. Therefore, there has been since December a certain amount of slowing down which in some quarters has, I think, caused some dissatisfaction. But that could not be helped. The money available up to the end of this year had to be reserved for the more urgent calls and some of the smaller authorities. As a matter of fact, up to the end of January we bad got to within a very near margin of the amount authorised by Parliament, and the result of that is that something like £4,500,000, which otherwise would have been advanced during the current year, will be thrown over into the next year, making a larger sum to be provided for than would otherwise have been necessary. Therefore, the sum now being asked for is not £35,000,000, as it was last year, but is now a sum of £40,000,000. That is not an unprecedented sum. We have had that sum before, but at all events that is the reason why it is necessary to ask for a larger sum this year than last year.


May I ask the right hon. Gentleman whether the sum is gradually increasing in amount?


I am not sure whether the hon. Gentleman means, "Is the amount a progressive increase?" We have had the same sum in former years, but the amount is certainly increasing enormously, as compared with pre-War figures.


I did not know that we had had £40,000,000 before.


It is due to the demands made by the various housing and other schemes, which are well known. But there are two rather exceptional features in this Bill which I ought to explain. Clauses 2 and 3 are necessary in the present Bill on account of a loan to. Eye-mouth Harbour of £10,000, which was made in the year 1892 under rather peculiar conditions. I do not think it is necessary for me to go into that in any great detail. It is enough for me to say that the only security under Statute for this loan a fund called the "Surplus Herring Brand Fees." Under the Statute, when those fees are insufficient to cover the instalment and interest for any year, then that instalment has to be remitted altogether under Statute. Last year there was, fortunately, a surplus of these herring brand fees, but this year there is a deficit, and, therefore, it is necessary under the National Debt and Local Loam Act, 1887, to write off the sum of £200, which is the instalment of the loan which is due. The interest, amounting to £71 17s., is irrecoverable, and therefore written off under the Statute. That is the reason for Clauses 2 and 3.

But another quite exceptional feature appears in Clause 4, and I think I ought to explain how that comes here. Before the establishment of the Irish Free State, loans, of course, were made in Ireland, just as they were made in Great Britain. They were made in Ireland through the Irish Public Works Board and the Irish Land Commission. A very large number of those loans were in existence when the Free State was set up in 1922. It has become necessary, of course, to make some, arrangement with regard to the service of those loans and a provisional arrangement was made in 1922 that the sums due under the various loans should be paid in to the Government of the Irish Free State, and they should deduct the cost of collection and the estimated sum due for bad debts, and, having made those allowances, that they should then pay over the balance to the Government here. That system went on up to last year. Obviously it was open to many objections. Some of these were long-term loans, some of them were for upwards of 70 years, and it was obviously an unsatisfactory arrangement that two separate Governments should be dealing with there long-term loans, when the one which was mainly interested, ourselves, had no machinery for collection, had no administrative staff in Ireland, had no means financially of checking the cost of collection and had debts. We had, necessarily, to take the matter on trust. Therefore, by mutual agreement between the two Governments, an arrangement was come to last year which was really an arrange- ment for commuting the liability in this respect. The outstanding amount of the loans in Ireland at present market value is just about six and a half million pounds—to be exact £6,570,000, and the arrangement that has been made between the Free State Government and ourselves is that instead of them collecting and deducting as I have described over the whole period of these loans, some of them running for 70 or 80 years, they should pay us a definite annuity of £600,000 for 20 years and that then their liability should be extinguished. In recent years the cost of collection has been about £20,000 a year, and the amount deducted for bad debts would represent as near as possible £27,000 a year. We get rid of all that; there are no deductions to be made: we get a clear fixed sum which does not vary through any contingencies of that sort; and at the same time minor claims which might he made on the fund by the Trish Free State are withdrawn. Therefore, our reckoning is that this arrangement gives us just about £650,000 a year for 20 years, and the capital value of that sum would he just over £8,250,000.

That arrangement is a favourable and perfectly sound financial transaction, and it is one which we should congratulate ourselves upon having been able to make. The amount is sufficient to pay the interest on the loans, and to redeem all the stock at the end of 20 years, allowing for a very considerable rise in the capital value of the stock as great a rise as is likely to occur. Therefore I think it is, I may say, really a very favourable arrangement from our point of view. It is a great benefit to get rid of overlapping functions between the two Governments and the various contingencies over which we have no control and no means even of testing, and the cost of collection being outside our own control might possibly have been extravagant; at all events, we should have had no sort of check upon it. There are no administrative costs in this country because the annuities are paid straight from one Government to another, and therefore we avoid overlapping, we avoid friction, and we have got what we believe to be a quite firm and safe solution of this particular liability. Therefore, I confidently recommend this to the House as a desirable arrangement, and it is for that reason that it appears in this Bill and forms a rather unusual feature of it. That is all that it is necessary for me to say about this Bill. The House knows that our commitments for housing, small holdings, agricultural credit and so forth mean lending a very large amount of money amongst local authorities throughout the country, and it is in order to enable that work to be carried on during the next financial year that the House must accept this Bill, as I hope it will, because the period during which we are authorised to advance this money lapses during March, and therefore we are anxious on behalf of the local authorities, to get this Bill through without unnecessary delay.


As the Financial Secretary of the Treasury has indicated, this is a Bill which it is the duty of his Department to present every year. Consequently it is difficult to find any new material for argument in this connection. But to-night there are two features, one, which is not entirely new referring to Evemouth Harbour, and the other, which is certainly new, referring to the arrangement he has reached in the case of the Irish Free State. As regards Eyemouth Harbour, the subject has been under consideration from time to time by those who have held the office which my m right hon. Friend now occupies, and the peculiar arrangement which was entered into many years ago in associating the security with the herring branding fees practically regulates what we can do and must do in existing conditions. I think the House can have no quarrel whatever with the proposal made in the Bill. The Financial Secretary has also indicated that, in all the circumstances, this is probably the best arrangement we could make as regards loans under this scheme in the Irish Free State. I confess that when my right hon. Friend was speaking I did not recall whether this formed a part of the general settlement which was effected with the Irish Free State some time ago, and was discussed in the House at the time. Apparently it was not, and in order to leave the Irish Free State on its own legs, as regards public works loans, this annuity of £600,000 for 20 years has been accepted; and if the Treasury regard that as a satisfactory arrangement I have no doubt that, on all the facts, it is a position which the House would accept.

But when we come to the broad general purposes of this Bill, there are one or two arguments of importance which should be offered to-night. The Fnancial Secretary shows that £40,000,000 is necessary on this occasion, and reminds us of the demands of the local authorities for housing and other schemes. From time to time the financial facilities which are placed at the disposal of local authorities have been more or less sharply criticised. As the House is aware, the Public Works Loan Commissioners have to work under a form of extreme, or almost extreme, regulation, in which a certain basis of assessable value is laid down. We have argued on previous occasions that the broad result of this operation is to rule out the very small local authorities from assistance from the Public Works Loans Commissioners, and to make the position such that the large local authorities can do better on the open market. Therefore, the bodies which tend to come to the Public Works Loans Commissioners are the intermediate local authorities in Great Britain. Various replies have been offered to that criticism, but certainly most Members would agree that if we can handle our national resources in such a way as to place credit or funds at the disposal of small local authorities on the easiest possible terms it would be a development which is very desirable in existing conditions. I am not going to suggest that we should compel a local authority to go to the Public Works Loans Commissioners, if, in fact, it can do better in the open market; but it was pointed out recently by a distinguished banking authority that there is in this country a great mass of savings recruited through friendly societies and a large number of other organisations—an amount which he put in the aggregate as high as £4,000,000,000.

A Bill of this kind affords an opporunity of discussing whether we are doing everything to see that savings which are recruited on comparatively humble terms do get to the local authorities on the best possible terms. A large number of local authorities are at the present time borrowing at 5 per cent., or 5¼ per cent., and in one or two cases at a rather higher rate for urgently necessary public schemes. In view of the general tendency of the Government's legislation—I do not altogether blame the Financial Secretary, because the holder of that office has many unpleasant duties for which he has no immediate or primary responsibility—to pile up the burdens of the local authorities in the interests of reducing general taxation, as the Chancellor seems to think, there is no doubt many local authorities have come to the view that they are going to carry enormous burdens for a very long time. The necessities of the tasks immediately before them and past borrowings make it very difficult for them therefore to go to the market with the hope of anything like favourable terms as regards interest rates.

Some time ago a device was introduced under which a portion of the proceeds of the National Savings Certificates was set aside for the definite purpose of assisting housing schemes in the localities where those certificates were issued. I make allowance for the fact that those savings certificates were recruited at a comparatively high rate of interest, and that the holders enjoy the advantage of exemption from Income Tax in respect of them. That apart, the system encouraged people to save, and they could see the results of their savings in the houses which appeared, no doubt slowly, in their own districts. It was a kind of local or specific allocation. The Committee over which the late Mr. Montagu presided, and upon which some of us served, reached the conclusion that the time had come for the modification of that scheme, in order to give the Treasury the freest possible use of these resources, while also retaining some part of the device which had been in operation. That was not a trial of this system under the most favourable conditions; but my point is: Are there any means by which we can get the proceeds of the thrift which is encouraged by a large number of agencies, and particularly the Trustee Savings Banks, passed on more readily to the local authorities? Is there any contribution which the Government, through national legislation, can make towards that end? It is true that up to a point they do so reach local authorities at the moment, but I am inclined to think that the hour has struck when we might very well plead for some review of the whole policy of the Public Works Loans Commissioners in this country, mainly from the standpoint of the enormous burden which now rests upon the local authorities, and also from the point of view that in so far as these local authorities can engage in necessary and remunerative work they will be making a definite contribution to the reduction of employment. They will be entitled to any consideration we can give them if they reduce the enormous total of payments for what we all recognise to be no practical service at all, payments which are in the nature of temporary relief, though in some cases sinking into permanent, or almost permanent, relief. That is the kind of problem with which this Bill deals. I am bound to say that I have never heard on the other side of the House a very effective reply to the criticism that the very small local authorities do not really participate in this scheme and that we tend to confine ourselves to a middle group. These are only general observations, but it is in existing conditions a matter of great importance if we want a contribution from the locality of a substantial character, especially in regard to the reduction of this great problem of unemployment.


The right hon. Gentleman who has just sat down made a most interesting contribution. One can follow his analysis with the greatest ease. I have some doubt as to the conclusion to be drawn from his analysis. If his argument was that it is a good thing to relieve national credit by bringing into the market as borrowers on their own credit municipalities and as many such auxiliary borrowers as possible, that proposition might have general assent. If we are to deduce from his analysis what I may call the principle of compartmenting or pigeonholing of funds borrowed by the Government for local purposes, in that proposition he would not command the same degree of assent. At one time it occurred to me that the right hon. Gentleman's discourse might be leading up to the question of municipal banks. It is a most interesting problem to thresh out on the Floor of this House on some other occasion, but it would I fear not be in order at present. There is an observation which ought to be made upon the Second Reading of the Public Works Loan Bill, even at the risk of repetition ad nauseam. I can make it as an expression of sympathy with the Financial Secretary rather than a criticism. The Financial Secretary and the Chancellor of the Exchequer must pay attention to the maintenance of national credit. This great lump of borrowing for local loans that comes along every year in its relation to national credit should cause them sleepless nights. It is a leak in the dam which we are trying to build in order to fill the reservoir of national credit.

It is not a cheerful task to call attention to this relation between this borrowing and our sinking funds. It is admittedly no good paying back debt with one hand while you are borrowing with the other. Here we are borrowing £40,000,000 on the strength of national credit, and at the same time by the sinking fund we are paying off £50,000,000 to support national credit. That is not common sense. There is an excuse for it. The two sorts of debt stand on a different basis. Behind local loans there are assets. That distinguishes this debt from that which we redeem, it may be said. The Financial Secretary would assist us to a better understanding of this question if his reply he would give us some account of what are the assets which stand behind the local loans at the present time. What is the, basis on which it is legitimate to consider this class of debt as standing on a different footing to the debt we are paying off? During the last five years we have reduced our interest charges on debt by £20,000,000. That is no small achievement, but it should be much greater. The reduction of charges on debt is the best hope for the reduction of taxation in the future. To reduce debt charges we must improve national credit. This annual borrowing for local loans is at present the greatest new additional burden on national credit. If we could get rid of it, that would be the most effective thing we could do to put our credit hack to a 4½ or 4¼ per cent. basis. I do not think any apology is due to this House for laying emphasis on so vital an aspect of national finance.


I should like to re-echo all that has been said by the right hon. Gentleman the Member for Norwich (Mr. Hilton Young) in regard to the national debt and ournational credit. I do feel that is a most important point, but I do not propose dealing with it now. There are one or two other special questions which I should like to ask the Financial Secretary. I should like to know whether this £40,000,000 will be issued to the public and, if so, will it be on the statutory 3 per cent. interest basis. If that is so, then the stock will be issued at an enormous discount which at the present moment or at any time would not be to the advantage of the taxpayer I welcome the suggestion made by the right hon. Gentleman the Member for Central Edinburgh (Mr. Graham) that there should be a review of all these accounts, not only the public works loans account, but also the local loans account. I notice in the local loans account which I conclude comes under this Bill, various accounts which appear to me quite unsatisfactory. There is one in particular in the local loans account. where I find the expenses of the management of the fund run up to £95,000 and part of that consists of the expenses of the Government of the Irish Free State, which amount to £47,000. I suppose that item will be got rid of when this particular transaction provided for in this Bill is agreed to. I also notice in the Report of the Comptroller and Auditor General on page 11: Loans in Arrear.—The following statement shows the arrears due from Borrowers on 31st March, 1925, excluding the amounts written off the assets of the Fund, as compared with those on 31st March, 1924. This shows a loss to the public, and ii is a very large sum amounting to about £600,000. I should like to know whether those arrears have been paid and what is the position, and I would also like to know whether they are really responsible people that this money has been lent to. I should like to ask with regard to the £600,000 to be paid by the Irish Free State, whether this amount will go in reduction of local loans stock. That is an important point, and if the Financial Secretary will reply to those one or two questions I should very much appreciate it.

Lieut.-Commander KENWORTHY

I would like to hear the reply of the Financial Secretary to the very important questions which have been put by the hon. Member for Ilford (Sir F. Wise). I think these questions are of some im- portance, and should be answered before we pass the Second Reading of this Bill which is the more appropriate occasion than when are are dealing with the Financial Resolution. I would like to hear a statement from the Financial Secretary as to the general indebtedness of the Irish Free State. The whole question of the transfer of money from one nation to another is of peculiar importance and interest at the present time. I understand that the Irish Free State is about to have its awn currency. I do not know how that will affect matters, but last Autumn I was over in Ireland and from what I gathered then I concluded that the country is very prosperous and credit is very good, and some information on that point from the Financial Secretary would be very useful.

We used to have some very pessimistic prophecies with regard to the financial stability of the Irish Free State. Here I notice a very large sum of money is due to be paid for some time ahead, and I think some words of comfort would be very useful on this point from the Treasury. I may say that from what I have seen in Ireland the country seems very prosperous. I knew Ireland very well before the War when I was a naval officer, and at that time I saw more of the land than the sea, because I hardly ever went to sea at that time as I was moving about the country. The change is extraordinary, and whatever the paper position of the Irish Free State may be the fact that strikes every observer who returns from Ireland to this country after an absence of some time is the increased prosperity, particularly of the land workers and the agricultural population generally. We see much better gardens and new buildings on the land, and those are signs which are more valuable as showing the prosperity of the country than any paper figures. When you see so many new buildings on farms and on estates which used to be half-derelict in the old Mays, I think that is a sure sign of increased prosperity. The Irish Free State are much ahead of this country in carrying out a great unified system of electrification for the whole of the country. They have gone much further than this country in that respect and when the electrification works are completed on the Shannon, they will be able to extend the electric system all over the Irish Free State, and I believe all over Ulster as well if the Government of Northern Ireland desire it. They are far ahead of this country in regard to the supply of the electricity. That is a most remarkable thing in a purely agricultural country like Ireland. Of course, they have not the same vested interests to overcome, because, perhaps fortunately, Ireland has not been industrialised to the extent that this country has, and it is only here and there that there are any electrical undertakings at all.

I only mention this in passing, as showing that the Irish Free State is improving its financial position to a great extent, and that that is a justification for the policy which has been advocated by this party and by my friends below the Gangway—or, perhaps, I may say my late friends below the Gangway—for so many generations. I think that that policy has been justified by the result. I think the approval by this House of a scheme for financial payments from the Irish Free State to this country gives an opportunity for the right hon. Gentleman the Financial Secretary, of all people, to give us some account of the financial situation in Ireland. [Interruption.] I am glad to see that another colleague of his from Northern Ireland (Sir M. Macnaghten) is here as well. I notice that, whenever a payment falls due from Northern Ireland, very good reasons are put forward by the hon. and learned Member as to why a further postponement should be granted by this House, or else some further loan made. I was not, however, talking about Northern Ireland. The time for that will come, no doubt, later in the Session, because, every year that I can remember, there has always been some new financial proposal from the Northern Government for assistance with regard to police or some other Department. With regard, however, to the Irish Free State, I think that, before the House parts from this Bill, we should have a short sketch of the position as between this Government and the Irish Free State Government in regard to finances. There is, of course, the guaranteed land loan which was passed by this House, and I do not think there has been any sort of hitch with regard to the land annuities, but, of course, that affects the credit of the Irish Free State, and, therefore, the repayment of this local loan fund.

There is one other comment that I wish to make as between the Free State and this country. It is a very curious thing that this particular Bill should pass through this House, as I think the fifth Order to-day, with a very sparse attendance of Members, and with no sort of interest on the part of hon. Gentlemen opposite, whose benches behind the Government Bench are almost empty. I should have thought that this was an occasion when Members of all parties could have expressed their satisfaction that this large and substantial sum of money should he coming at regular intervals, as laid down in this Bill, from the Irish Free State into the British Exchequer. After all the Debates that I have heard in this House with reference to Ireland and England, after the Debates that you, Mr. Speaker, have heard and which I have not heard, because I was not here, but which I have read with great attention, and after the agreement that has come about between different quarters of the House on the Irish question, I think we should have had some expression of satisfaction that, only these few years after the signing of the Treaty, and in spite of the fact that Ireland was for the first two years disrupted by a devastating civil war, such is the natural strength of the Irish people when allowed to manage their own finances that they are able to make this very substantial payment to the Exchequer at the regular intervals laid down in the Bill; and, as an English Member, I feel that I cannot allow the Second Reading of this Bill to pass without expressing the satisfaction of my friends on these benches at the satisfactory state of affairs disclosed in the Bill.


I intervene only for a few moments on these two points. I appreciate very much that, although there is not a very large attendance in the House, one or two Members, at any rate, have indicated their desire that on such an occasion as this the House should assume as much control over finance as possible, and have made certain inquiries on the Second Reading of this Bill, the Debates on which have been rather restricted in previous years. I am sure that, on the whole, the Financial Secretary will not be averse to those inquiries, and will be glad to give as much information as possible. The right hon. Gentleman the Member for Norwich (Mr. Hilton Young) said a word or two as to the connection of local finance with, and its effect upon, the national credit. I am not sure that he could not have pursued his point further, and discussed the alternative method of raising loans which has been suggested from time to time from these benches. My right hon. Friend the Member for Central Edinburgh (Mr. W. Graham) did not, it is true, develop it to the extent that the right hon. Gentleman seemed to desire, but it is perfectly plain, I think, that the more one can provide by local effort the finance for local schemes which come within the purview of what we call local loans, the better the effect upon the national credit. May I say, in that connection, speaking from my own knowledge of the thrift of the people in the localities—not through the suggested municipal bank to which the right hon. Gentleman referred, but through our own industrial and provident societies—that we have again and again been able td lend money without reference to the Public Works Loans Commissioners, but through the thrift of working-class people, direct to the municipal authorities who had to undertake capital works in their localities. That is a very great saving to the national credit, and, if the Government really wanted to effect a saving in that connection, they might, perhaps, do worse than encourage these alternative methods of local finance for public works which have to be undertaken from time to time.

I also welcome the question of the right hon. Gentleman the Member for Norwich to the Financial Secretary as to what assets can be shown as being behind these loans. When we put forward from this side our proposals with regard to public finance from time to time, the finger is continually pointed to this or that public undertaking which has been financed by public loans, and which, in the view of certain hon. Members, has not been successful, As a matter of fact, however, if we take the indebtedness of these localities, and consider not only the sinking fund provision but also the assets of these undertakings, they would not be described as failures, but as actual successes. If, as I believe to be the case, the Financial Secretary can assure the House as to the extent of the assets which are behind the local loans which have been issued in the past, it would not only assist those local authorities to whom my right hon. Friend the Member for Central Edinburgh referred as getting their finance through these loans, but would also assist the credit of authorities such as I have been connected with myself, which go straight on to the market for their requirements.

Perhaps, as I represent a Sheffield Division, I might be allowed to use the City of Sheffield as an illustration of my point. There we have municipal undertakings which are able, not only to produce completely adequate assets in respect of the loans which they have issued on the market, but also to show a very substantial profit in the revenue account for the relief of the local rates. I am quite certain that it would do the credit of the local authorities of the country, and, perhaps, the national credit, some good if the Financial Secretary could give a reassuring reply to the right hon. Gentleman the Member for Norwich on that point. I am certain that he could do so. He may, perhaps, say that he cannot give such particulars without notice, but I am sure that those Members of the House who want to see an increasing control of national finance by the House would desire that in the future, on occasions like this, such information should be forthcoming. Perhaps, if the right hon. Gentleman has not been able to have it in time for the Second Reading, he could give it to us in a subsequent discussion, either on the Money Resolution or during the Committee Stage of the Bill.

The other point that I want to mention is this: I was not at all clear, from the statement of the Financial Secretary, as to how we are going to come out of this new arrangement with Ireland. I can quite see the desirability of coming, if possible, to a flat-rate payment which is profitable to us. That would save a good deal of overlapping in respect of payment of expenses. I was not at all clear, however, from the right hon. Gentleman's statement, that we are going to be very much better off. Some of us have been rather nervous during the last year or two as to the concessions which have been made at least to one part of Ireland, and I think that hon. Members on the other side have sometimes been nervous about concessions made to the other part. I think it would be interesting if the Financial Secretary would give us, in his reply, not merely a general statement such as he gave us before, to the effect that he thought the arrangement made would be favourable, but if he would tell us, as nearly as he can estimate, what the actual saving to us will be.


I should like to support the request of the hon. Member for Ilford (Sir F. Wise) to the Financial Secretary for some information as to the method of raising these loans. We have had presented to the House, only within the last few hours, the Report of the Colwyn Committee, in which they express strong dissent from the method of converting loans whereby the lender receives a considerable premium when the loans are finally redeemed; and, although the principle is not precisely the same in the case of these local loans, I think the argument is one that ought to be fully taken into account. A further point raised by the hon. Member for Ilford was with regard to this sum of £600,000. Do I understand that it is all to be put to income, or will it be put, in some degree, at any rate, to sinking fund? If it is all put to income, we have the position that this money, which is partly capital and partly income, is not being credited in the way that it should be. In connection with both these matters we should have, in effect, what I would describe as a negative sinking fund, and I think it is a considerable danger if, while we nominally have a sinking fund of £50,000,000 a year on the National Debt, we fritter that away by various means which enable us to pay a lower annual sum to the bondholders through an increase of the capital amount of the Debt. I should be glad if the Financial Secretary could tell us, in the first place, what are the particular loans on which the money is supposed to be raised, and, secondly, in exactly what form the £600,000 is going to be credited. I should further like him to say a few words on the position with regard to Northern Ireland. We quite appreciate that it does not come into this Bill, but I think it would in order for the right hon. Gentleman to explain, when we are dealing with this sum, and are dealing, there- fore, only with Southern Ireland, exactly what is the form in which the local loans apply to Northern Ireland.

6.0 p.m.


I think the Financial Secretary said that £40,000,000 of these loans was for housing. That brought to my mind the difficulty that local authorities sometimes find in getting the money necessary for housing, and I wondered whether the increased figure meant that, those local authorities were finding it easier to-day to get the necessary money for building houses than they did when I happened to be a member of a local authority and to have to get this money. I remember the time when we used to go to the Public Works Loans Board to borrow money for housing. We were told on one occasion to see if we could not get if from other sources, and on several occasions our housing programmes were held up because we could not get the money. There was a scheme, I believe, some years ago that local authorities should be expected to raise so much within their own neighbourhood. We never quite got up to that. We found it a very difficult matter to raise money. It is a relatively poor neighbourhood, almost entirely working class, with no people of the character that invest large sums of money each year. We also found a difficulty very often in getting it in the open market as we were recommended to do. It is because our housing schemes were held up time after time that I am asking the Financial Secretary now if this larger sum indicates that the position has been eased and relieved so far as the smaller authorities are concerned. If it is, I shall be very glad to learn it. In my constituency the housing programmes have often suffered because of the difficulty we found in getting loans from the Public Works Loans Board.


Several hon. Members have asked about the assets on which these loans were based. The great majority of them are loans to local authorities and the security behind them, so far as the Loans Commissioners are concerned, is the local rates. The local rates, of course, depend on assets behind them, but the actual assets on which these loans are secured are the local rates. That, I think, suggests the answer to what the right hon. Member for Central Edinburgh (Mr. W. Graham) opposite said in regard to very small authorities. He said there were no loan facilities under this Act given either to the very large authorities or to the very small authorities, and it was only a sort of middle grade that got any advantage.


I did not say there were no facilities. I said the policy worked out in such a way that the Public Works Loans Commissioners tended to cover only the middle grade. The others, to the best of my knowledge, are not excluded on paper, but in fact that is the tendency.


The larger authorities are excluded because they are in a stronger financial position, and can go to the open market and obtain an unlimited supply of money. It is quite right that this Government help should be to a large extent reserved for the smaller and weaker authorities. I think the actual figure is £200,000 annual value. The hon. Member who has just sat down spoke about the difficultly in one place or another of getting advances under the Bill. Obviously, the Commissioners who are managing these funds have to have some regard to the national credit and to the general conditions of the locality to which the advance is made. I have had examples brought to my knowledge where advances have been made, and the authorities have found themselves in difficulties. It is very often difficult for them to repay the advances. It is quite clear that the Commissioners must to a certain extent be hard-hearted and must put difficulties in the way of making advances unless they are satisfied that the rateable value and the rates levied upon the locality offer a reasonable security that the service of the debt can always be maintained.

I do not think I can follow the hon. and gallant Gentleman the Member for Central Hull (Lieut.-Commander Ken-worthy) in his disquisition on Ireland. I presume, as you, Sir, allowed him to continue, that it was, strictly speaking, just in order. No doubt the fact that an annuity of £600,000 for 20 years is by arrangement paid to this country by the Government of the Irish Free State makes it just in order to discuss at large the financial past, present and future of that State. The hon. and gallant Gentleman told us about his recent visit to Ireland and about the Shannon scheme. He spoke of it with such enthusiasm and optimism that I have no doubt he has given it large financial support. I should be very sorry indeed to say anything to detract from the very rosy picture of that country he has brought back with him. I hope it is all true, but it is the most optimistic account I have heard yet and it contradicts a great deal that I have heard from other sources. I earnestly hope it is authentic, but I do not think it has really a great deal to do with the Bill. The only matter with which we are really concerned is, whether or not this annuity is a good and sound bargain from our point of view for dealing with the account between the two nations arising out of local loans. I do not know that I can add very much to what I said in my opening observations on that point. One hon. Member asked whether it would include a sinking fund. I thought it unnecessary to say so, but of course it does, and it is calculated upon a basis which is favourable because it allows for a very considerable rise in the capital value of the stock and yet enables us to give a comparatively short period to liquidate the debt owing to us from the Free State.


I do not know whether the right hon. Gentleman was referring to me, but I wanted know whether the £600,000 would be treated as income, or part as income and part as capital, and allocated accordingly.


It is being treated to satisfy the annual debt interest on these loans and to provide a Sinking Fund for paying off the total. My hon. Friend the Member for Ilford (Sir F. Wise) asked me whether there were arrears from the Irish Free State and how they were dealt with. The arrears have either 'been paid off altogether or taken into account in some cases in calculating the £600,000 annuity, and that, I think, is quite satisfactory.


Is it going to be an issue to the public?


These loans have almost invariably been issued to the National Debt Commissioners. A question was put to me with regard to issues at a discount. I quite agree with the hon. Member's view, and I do not suppose there will be any two opinions about it. It is clearly undesirable, if you can avoid it, to issue loans at a great discount. The nearer you can get to a par issue undoubtedly the better, but it is not always possible to do it. There are considerations which you have to take into account in making these loans, especially perhaps to local authorities. All I can say is that the Treasury are very much alive to the desirability of getting as near to par as possible.


I wish to endorse every word that has been uttered by the hon. Member for Doncaster (Mr. Paling), and to appeal to the right hon. Gentleman to do all he can to assist small local authorities. I have been a member of a local authority for many years and we have found great difficulty when the Commissioners have refused us a loan and we had to go to the market. You could say in your regulations to the local authorities, "If you can borrow at the same rate of interest charged by the Public Loans Board, go and get it," but to expect them to pay probably 1½ per cont. more is tying them up. Very large responsibilities fall on the local authorities, and they must be assisted as far as possible in their public work. I appeal to the right hon. Gentleman to take into account the position of the small local authorities and aid them in every way he can.

Question put, and agreed to.

Bill read a Second time.

Bill committed to Committee of the whole House for To-morrow.—[Mr. R. McNeill.]