CLAUSE 1.—(Grants for public works.) (Hansard, 12 July 1934)

§ Mr. T. WILLIAMS
I wish to ask the Financial Secretary to the Treasury a simple but important question relative to local authorities. The question of the interest paid by local authorities on loans, since loans were advanced by the Public Works Loans Board, about 1921 or 1922, has been a thorny one. The hon. Gentleman will remember that during that period local authorities, for water purposes or gas or electricity development, or for other public services that are so essential to the well-being of the community, who had no access to public trustee funds were obliged to pay anywhere about 7 per cent. for loans that were advanced to them. Many of these loans were dated for a number of years and under no conditions could they be liquidated prior to the expiration of the date determined. As a result, local authorities to-day are paying anything between 5 and 7 per cent. on loans that were advanced for public services of some kind.
In reply to a question on Thursday, the hon. Gentleman intimated that not less than £89,000,000 was still owing by local authorities for money borrowed at rates in excess of 5 per cent. It is true that a goodly proportion of that sum was advanced for the purpose of housing under the 1919 Housing Act, and that to the extent that the sums were borrowed for housing purposes, all the repayments in excess of la penny rate have to be met by the Government; but many local authorities are still burdened with these huge rates of interest, which we think ought to be reduced as early us possible. It is true that within recent history the Public Works Loan Board has found ways and means of reducing the rate of interest on current and future loans, but old dated loans still current have to be met by local authorities. There was a Conversion Loan some time ago when War Loan was converted from 5, 4¾ and 4½ per cent. to 3½ per cent. Considerable sums of money were saved to the Exchequer. I have heard the Chancellor on many occasions claim a good deal of credit for that Conversion Loan. While we do not expect the Treasury to meet any deficit that may accrue between the rate of interest paid by the Public Works Loan Board and any concessions granted to local authorities, we do feel that if it 662 were expedient and fair to issue and carry through the conversion of War Loan, it would be equally fair to insist upon a conversion of those loans borrowed by the Public Works Loan Board for the purpose of advancing money to local authorities.
The hon. Gentleman on the spur of the moment may not be in a position to reply now. We appeal to him, however, when this further £18,000,000 is borrowed, not only to borrow it at the least possible rate of interest consistent with helping the local authorities, but to let the people who are in the habit of advancing loans to the Public Works Loan Board know that there will be a conversion of past loans, and to that extent a mitigation of the burden of the local authorities. The question is a very simple one, but it has been before the Treasury on previous occasions, and we think that it is high time that the local authorities, which were obliged to borrow money at 6, 6½ and 7 per cent., should be relieved of some of their burdens. If a compulsory conversion be the only means whereby local authorities can be relieved, we think it is high time that a compulsory conversion ought to take place. We do not want to hold up this Measure, and we only submit this to the hon. Gentleman in the hope that he will take it to the Chancellor of the Exchequer, and, if it be possible consistently with the financial dignity of the country to insist upon a conversion, that the Chancellor and the Financial Secretary may think it worth while to carry it through.

§ The CHAIRMAN
I did not realise what the hon. Gentleman was doing. I noticed that he said towards the end that he did not expect the Financial Secretary to the Treasury to be able to answer his question right off, and I am inclined to think that if he attempted to do so, I should have to rule him out of order. I do not see that the question really can be raised on this Bill at all, and I could not allow a. Debate on it.

§ The FINANCIAL SECRETARY to the TREASURY (Mr. Duff Cooper)
With your permission, Sir Dennis, I will say briefly that we have looked very carefully into this question, and we can see no possibility of meeting the hon. Member in this matter, for the simple reason that the money lent at that time at that 663 high rate of interest, which was the current rate at the time, we were compelled to borrow in order to have the wherewithal to lend it. In order to alleviate the burden on the local authorities, we should be compelled to bear the whole of the loss. Conversion would not be possible for those loans still outstanding, and there is no possibility of raising the money in any way except at the expense of the taxpayers. It is unfortunate for the local authorities that raised money at that time, but the greater part of it was borrowed to meet the plans under the Housing and Town Planning Act, 1919, and the greater part of that burden is now borne on the Exchequer, which would be the principal beneficiary from any relief obtained. I do not think anything was raised at 7 per cent. I think 6½ per cent. was the highest rate, and only very small sums were raised at so high a rate as that.