CLAUSE 46.—(Temporary application of moneys in housing accounts.) (Hansard, 20 May 1935)

Sir H. YOUNG
I beg to move, in page 41, line 11, to leave out from "may," to the end of the Clause and to insert: be used by the authority for the purpose of any statutory borrowing power possessed by them subject to the conditions specified in Sub-section (2) of this Section, and so far as not so used shall be invested temporarily in statutory securities (other than securities created by the authority), and an amount equal to any income arising from such investment shall be credited to the Account. (2) The conditions subject to which moneys may be used as mentioned in Sub-section (1) of this Section shall be the following, that is to say: (a) the moneys so used shall be repaid to the Account out of the general rate, or the general rate fund, within the period, and by the methods within, and by which a loan raised under the statutory borrowing power would be repayable: Provided that the authority shall repay to the Account the moneys so used or the 133 balance thereof for the time being out standing, as the case may be, as and when required for the purposes of the Account, and may make such repayment at any time within the period aforesaid, and in either case the repayment shall be made out of the general rate, or the general rate fund, or out of moneys which would have been applicable to the repayment of a loan if raised under the statutory borrowing power; (b) in the accounts of the general rate fund an amount equal to interest (calculated at such rate as may be determined by the authority to be equal as nearly as may be to the rate of interest which would be payable on a loan raised on mortgage under the statutory borrowing power) on any moneys so used and for the time being not repaid shall be credited to the Account and debited to the undertaking or purpose with reference to which the moneys are so used; (c) the statutory borrowing power shall be deemed to be exercised by such use as fully in all respects as if a loan of the same amount had been raised in exercise of the power, and the provisions of any enactment as to the re-borrowing of sums raised under the statutory borrowing power shall apply accordingly. This Amendment, though long in appearance, is, I think, non-controversial, and in substance scarcely amounts to more than a drafting Amendment. It deals with the power of a local authority in relation to the balances standing to the credit of the housing repairs account or the housing equalisation account, and to make use of these balances under its ordinary borrowing powers. It was agreed in Committee that it was undesirable for assent to have to be obtained on every occasion when a local authority wanted to invest surpluses of this kind, and that it was much more businesslike for the Clause to lay down the general conditions under which a local authority could invest the money. I think the Amendment fulfils the undertaking which I gave to the Committee as to the redrafting of the Clause.

§ Mr. H. WILLIAMS
I am very pleased that the Minister is moving the Amendment, but I would ask him whether it represents the general policy of his Department. At the moment, three or four Corporation Bills are having a Second Reading, and three contain general powers which enable the municipalities to use their sinking funds so that one department may lend money to another department of the same corporation. That does not seem very good finance. As far 134 as I understand the Amendment, what the right hon. Gentleman is proposing is that where a corporation has surplus money in its housing fund it has to invest it outside the corporation. I should like to know whether it is the intention to apply that generally to the municipal finance.

Sir H. YOUNG
I do not think that it follows from this Clause that all such moneys must necessarily be invested outside the corporation. Speaking with some hesitation and on the spur of the moment, I should not accept the general principle that it is bad finance for a local authority to invest its sinking fund with other parts of the same authority. On the contrary, I should look upon that as very good finance. I cannot argue it on a particular case, but the hon. Member for South Croydon (Mr. H. Williams) has challenged me on the general principle. It may be an economic thing for the local authority to make such investments. I would make it quite clear that the Clause does not rule out the possibility of investments of that kind.

§ Sir JOSEPH NALL
Is there not another point in regard to this matter? The right hon. Gentleman says he does not think it wrong for a municipality to invest money accumulated in the housing and other sinking funds in the way mentioned by the hon. Member for South Croydon (Mr. H. Williams). Is it not the real intention that they may expend this surplus cash in other capital commitments and not in paying off the sinking funds of other Departments This is a matter of public policy which would appear to require further explanation. If a local authority is accumulating funds against the day when certain loans relating to housing ought to be paid off, does the right hon. Gentleman think it proper for such an authority to expend that cash in other capital commitments?

§ Mr. HOROBIN
I am not quite clear about this, because on reading the Amendment I also received the impression that the words "other than securities created by the authority," applied to outside investments. The matter is of some importance, as the right hon. Gentleman has said, and the House would 135 like some guidance as to the conditions in which it is proper for a sinking fund, which was supposed to be available as cash for the payment of securities falling due, to be locked up in capital works of the authority. I should think that the hon. Member for South Croydon (Mr. H. Williams) was correct in saying that this is a dangerous thing to do. It has been the cause of trouble in many big industrial undertakings. Surely the whole purpose of a sinking fund is to have cash available for the retirement of securities. If that is not the intention of the Amendment, may I ask the meaning of the words "other than securities created by the authority"?

Sir H. YOUNG
The answer to the two hon. Members is that the transactions to which reference has been made are perfectly sound, natural and usual, and that they are subject to the safeguards of the Clause. The first safeguard is that the money shall be available when required, and the second and essential safeguard is that payment of the amount borrowed from other parts of the local authority shall be subject to the same condition, in relation to having to pay it back in the same time, as though the money were borrowed from any other source. There will be the same repayment of interest as if the money were borrowed from an outside body. With those safeguards, I think this is perfectly acceptable.