HC Deb 14 February 1939 vol 343 cc1547-8
49. Mr. De Chair

asked the Chancellor of the Exchequer whether he is aware that a number of small local authorities who have obtained loans from the Public Works Loan Board at a high rate of interest are not allowed by the board to pay off the principal when they have an opportunity of raising the money elsewhere at a lower current rate of interest; that the parish council of Outwell, Norfolk, who contracted a loan for £596 6s. 4d. at 6¾ per cent. are now expected to pay a premium of £297 15s. 10d. in order to be allowed to pay off the principal; and, in view of the fact that where public loans are concerned His Majesty's Government themselves have never hesitated to convert to a lower rate of interest when they were able to do so, will he reconsider the case of those small local authorities with a view to waiving the payment of premiums on repayment?

Sir J. Simon

Loans made by the Public Works Loan Board to local authorities are long-term loans and are made out of the Local Loans Fund, the money required for the loans being raised by the issue of Local Loan Stock. That stock is redeemable only at par and, when issued at a discount, cannot be so redeemed except at a loss to the fund and ultimately to the taxpayer. If a local authority desires to repay a loan before the end of the period for which it agreed to borrow, such repayment can only be admitted if the authority repays such amount as will be sufficient in effect to cancel the liability of the fund in respect of the stock issued to raise the amount of the loan. In present circumstances that requires the payment of a premium which could not be waived without exposing the fund to a heavy capital loss. With reference to the last part of the question, no loans issued by the Government have ever been converted except in strict accordance with the terms of the prospectus on which they were issued.

Mr. De Chair

While the actuarial position is obviously correct, is not my right hon. Friend aware that it weighs very heavily upon small local authorities who incurred these loans at a time of greater economic uncertainty, and who would be grateful for some kind of aid from the State to relieve them of that responsibility?

Sir J. Simon

My hon. Friend will see that the situation is as I have stated it and I do not think, in the circumstances, it can be expected that loans made by the Public Works Loans Board to local authorities should be dealt with otherwise than on the terms provided.

Mr. Thorne

What amount of interest have the Public Works Loans Board to pay for the money they borrow, and what do they get when they lend?

Sir J. Simon

As the hon. Member will be aware, the Public Works Loans Board does not aim at a profit, but is the instrument by which local authorities are helped to borrow money.

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