CLAUSE I.—(Prohibition of borrowing otherwise than from Public Works Loan Commissioners.) (Hansard, 20 February 1945)

§ Mr. Colegate (The Wrekin)
I beg to move, in page 1, line 8, at end, insert: except on mortgage for the purpose of repaying maturing mortgage loans. I need not occupy much time in moving this Amendment. I think it is in accordance with the Chancellor's intentions, and I hope the right hon. Gentleman will be able to see his way to put it in the Bill, because it would be of very great service to those who are concerned with this matter.

§ Lieut.-Commander Joynson-Hicks (Chichester)
I beg to second the Amendment.
I do not think the Bill as drafted is quite clear on this point, and I should like the Financial Secretary, in his reply, to state whether the proposal includes, as I hope it does, the surplus funds of other authorities, where the short-term period mortgage cannot be negotiated on advantageous terms, so- as to ensure that local authorities will be able to borrow from their own internal resources. The wording of the Clause, at present, is as I say not very clear, and it will be greatly appreciated, if this Amendment can be inserted, and the point made plain.

§ The Financial Secretary to the Treasury (Mr. Peake)
My hon. Friend desires to import words into Clause 1 of the Bill excepting from the general restrictions on outside borrowings loans on mortgage for the purpose of repaying matured mortgage loans. The Chancellor of the Exchequer, on the Second Reading of the Bill, gave a description of the exceptions to the restrictions contained in Clause 1, and said that it was intended to embody them in Regulations under the provisos of the Clause, and, as my hon. Friend knows, by Clause 8 of the Bill these Regulations are subject to a Negative Resolution of this House and to scrutiny by the Select Committee. My right hon. Friend, in moving the Second Reading, said that the exceptions 654 under Clause 1 would include borrowing on mortgage and certain other securities, providing that the total debt outstanding in such ways should never exceed the amount outstanding at the end of the financial year, 1943–44. My right hon. Friend went on to detail four other matters which will be dealt with under the Regulations.
The point raised by the hon. Member for The Wrekin (Mr. Colegate) is clearly covered, and completely covered, by the first exception detailed by my right hon. Friend in his speech on the Second Reading. The reason why we are reluctant to specify one only of these rather numerous exceptions in Clause 1 of the Bill is that there are a considerable number of matters to be covered. They are highly technical, and it may be necessary from time to time, in the light of experience, to amend the Regulations made under Clause 1, but, of course, any Amendment of the Regulations will be subject, in the same way as the Regulations when they are originally made will be, to Negative Resolution procedure in this House. I hope that, with this assurance and explanation, my hon. Friend will not press his Amendment.
In regard to the point raised by the hon. and gallant Member for Chichester (Lieut.-Commander Joynson-Hicks), I believe the point my hon. and gallant Friend had in mind is covered by Clause 7 of the Bill, which deals with the internal resources of local authorities and the utilisation of them for any of the purposes for which the local authority his power to borrow.

§ Mr. Colegate
Will the representatives of the local authorities' association have a chance of seeing these Regulations before they come before the House?

§ Mr. Peake
Most certainly. The Regulations are highly technical, and they have already been sent to the local authorities for their comments, and we shall agree them with the local authorities.

Mr. Colgate
In view of my right hon. Friend's satisfactory explanation, I beg to ask leave to withdraw the Amendment.

§ Mr. Peake
I beg to move, in page 1, line 13, at end, insert: (2) This section shall continue in force until the thirty-first day of December nineteen hundred and fifty, and no longer, unless Parliament otherwise determines. 655 Hon. Members will recollect that, in Committee, we discussed the question of placing a time limit to Clause 1 of the Bill. My right hon. Friend the Chancellor intervened in the Debate to say that it was not a matter of vital principle from the point of view of the Government, and that, if the Committee would like him to reconsider the arguments, he would be perfectly willing to do so before the Report Stage. A very general desire was expressed in the Committee for some time limit as regards the powers contained in Clause 1, and I myself was somewhat conscious of the difficulty of telling the Committee that a provision under the Bill would be continued only so long as necessary, and, at the same time, of putting nothing in the Bill to say what its duration should be. Our problem was that it is extremely difficult, at the present time, to anticipate how long it will be necessary to keep Clause 1, but we have undertaken with the local authorities to review the working of Clause 1 four years after the cessation of hostilities in Europe. That means to say that, on the assumption—and, I think, on the not too optimistic assumption—that hostilities in Europe end this year, that review will take place during the year 1949. It is perfectly clear that the Government of the day must have ample time to consider a change of policy in such an important matter as this, and we therefore propose, and I think it would be pleasing to the House, that the wish expressed in the House should be embodied in the Bill and that Clause 1, and Clause 1 only, should terminate at the end of the year 1950 unless Parliament otherwise determines.
12.15 p.m.
May I add that while we are very pleased to make this concession to the wishes of the House I should not like it to be regarded as in any sense a victory for the County Councils Association? The County Councils Association was one of the authorities with whom we had negotiations prior to the introduction of the Bill. The local authorities, through their associations, asked that certain assurances should be given, and we gave those assurances without any qualification; if this Amendment had been pressed, therefore, merely on behalf of the County Councils Association we should have felt bound, in the interests of mutual confi- 656 dence between the Treasury and the representatives of local authorities, to advise the House to reject it. But the House is a sovereign body, Members on all sides desire an Amendment of this character, and it therefore gives me pleasure to suggest that we should at this stage embody it in the Bill.

§ Mr. Silkin (Peckham)
My right hon. Friend puts it rather high in saying that this Amendment has been moved to meet the requests of Members from all sections of the House. So far as I am aware, those requests were made by one section of the House.

§ Mr. Peake
The hon. Member for North Battersea (Mr. Douglas), during the Committee stage, made what was intended to be a helpful suggestion for embodying a time-limit in Clause 1.

§ Mr. Douglas (Battersea, North)
The right hon. Gentleman is perfectly right in that, but I was not among those who pressed the Chancellor of the Exchequer to accept the Amendment then before us. I merely made a helpful suggestion for dealing with the matter by way of the Regulations.

§ Mr. Silkin
Therefore, I think I am right in saying that there was not a general request from all sections of the House. There were one or two speeches from one section of the Committee, and I think there was a general appreciation of the fact that the Bill ought not to continue indefinitely without further discussion, but I doubt whether, if the voices of the Committee had been taken, they would have been in favour of inserting a specific time limit. The Chancellor of the Exchequer said that it was really impossible to give a date when it would be appropriate for the matter to be considered and what he said certainly impressed me, and it surprises me that he should now run away from that position. I do not think it matters a great deal, and if this Amendment pleases some of my hon. Friends opposite and gives them a little crumb of comfort far be it from me to deprive them of it.
However, I should like to know what is the significance of the words "unless Parliament otherwise determines." Is that merely an indication that this matter will be considered some time before December, 1950? I take it that the words do not mean that Parliament can pass 657 a Resolution to continue the operation of the Bill. I should not have thought that was possible, and I take it that if it was intended to extend its operation beyond December, 2950, that would mean a new Bill. Let us be honest and frank and say that this till comes to an end in December, 1950, and not insert words which are misleading and may give rise to considerable confusion later. I take it there will be discussions with the local authorities some time before December, 1950. I imagine that the local authorities when they have had experience of the working of the Bill, will be glad that it should continue after that period, and I imagine that whoever is then in charge of the finances of the country will introduce a new Measure, either on the lines of this one or with modifications, for the purpose of continuing the operation of the Bill. That will not be affected by the words "unless Parliament otherwise determines." I should have, thought it wiser to leave out those words and to have the Bill operate in a straightforward way until December, 1950. It is on record that there is a general desire that there should he discussions before then, and some of us, if we are here, will make certain that those discussions take place.

§ Mr. Lewis (Colchester)
During the Committee stage an Amendment in very similar terms to that which we are now discussing was moved by my hon. Friend the member for Tamworth (Sir J. Mellor) and a number of very good arguments, as I thought, were brought forward in support of it. I ventured to suggest on that occasion that it might be helpful- if the Chancellor of the Exchequer would join our deliberations and consider those arguments, and I would take this opportunity of thanking him for having adopted that suggestion, with the result that we now see. I know from my own knowledge that many local authorities will be exceedingly glad to find that statutory recognition is now to be given to what I believe was always the Chancellor's own intention, that this Bill should be of a temporary character.

§ Sir John Mellor (Tamworth)
I wish to thank the Chancellor of the Exchequer and the Financial Secretary for this Amendment. An Amendment to all intents and purposes to the same effect which my hon. Friends and I supported in Committee was withdrawn by us in order 658 to enable the Chancellor of the Exchequer to give further thought to the matter, and we congratulate him upon the result. The Chancellor said in Committee, and it has been repeated by the Financial Secretary, that the Government regard this as a question of convenience and not of principle. I am very glad that the putting down of this Amendment has not involved him in any sacrifice of principle. My hon. Friends and I consider that this Amendment will not occasion any inconvenience in practice, but at the same time, we regard it as a matter of principle and of first-class importance.
I am sorry the hon. Member for Peckham (Mr. Silkin) rather suggested that there was a party cleavage upon this point, because I do not regard this as a party matter at all but as a House of Commons matter and one of legislative principle. I should have thought that all Members of all parties would be inclined to agree that in legislating we ought not to be satisfied with collateral assurances from Ministers but should insist on those assurances being reflected in the terms of the Bill. Where legislation is proposed for temporary purposes and is most expressly stated to be temporary we should insist upon some time-limit being inserted. It is most important that in legislation we should say what we mean and, so far as is humanly possible, neither more nor less than we mean. There are cases where we are not quite sure how things will work out. The Financial Secretary said the difficulty was that he could not quite foresee how long it was desirable that the prohibition in Clause 1 should operate. In a case like that we should impose some time-limit in order to secure an automatic review by Parliament within a reasonable time, and then the operation of the Measure can he extended if it is thought fit.
This is a very important Clause in a very important Bill. As it stands, unamended, it would for all time prohibit local authorities from borrowing otherwise than from the Public Works Loan Board, without Treasury consent. That is a very important and far-reaching step. If we should allow this Clause to go through unamended we should be permitting a very important matter to go by default.

§ Mr. Speaker
The hon. Member cannot discuss the Clause. He must keep to the Amendment.

§ Sir J. Mellor
The Amendment imposes a time limit upon Clause 1.

§ Mr. Speaker
That is a very simple point and a very limited one, and it is not in reason on that to discuss the whole Clause.

§ Sir J. Mellor
I am obliged to you, Sir, and I will certainly keep strictly to the Amendment. This Amendment effects a very important qualification. That qualification had been promised quite clearly by the Chancellor, and therefore I say it should be in the terms of the Bill, and that we should not create any precedent in this case by allowing a collateral assurance to be accepted as sufficient. This is a point of vital importance, because we shall be presented with a great deal of legislation for temporary purposes during the period of reconstruction—

Mr. A. MaeLaren (Burslem)
This is a temporary speech.

§ Sir J. Mellor
—and I hope that in this case we shall create a good precedent and not a bad one and impose a time limit. I hope that this will be accepted as a desirable Amendment by all sides of the House.

§ The Chancellor of the Exchequer (Sir John Anderson)
Perhaps I might be allowed just two words on this simple point. I think I ought to say something in regard to what was said by the hon. Member for Peckham (Mr. Silkin). I am told that the wording used here is common form in a case of this kind. Where it may be a question of extending a particular provision by the Expiring Laws Continuance Bill—or in this case it might be the Public Works Loan Bill—the words seem to be very appropriate, because the Clause, which would otherwise come to an end, then continues as an integral part of the original Bill for a further period. I hope the House will be satisfied to accept this Amendment.

§ Mr. Graham White (Birkenhead, East)
What the right hon. Gentleman has just said raises a doubt in my mind. I had intended to ask whether or not there was any practical advantage in having the words "and no longer, unless Parliament otherwise determines." I gather now that they have been put in because the matter is in the form which is commonly used but there is a possible disadvantage in this arrangement. We are now dealing with a matter of borrowing for a period of 660 time and whether the arrangement is to come to an end or not. This opens out an element of doubt, because it is possible that, six months before the arrangement comes to an end, the money market may be in doubt whether it is intended to make loans on these or other terms. The doubt is that after six months they may be able to make some better arrangement by some other means, and it may hold up the whole machinery until a decision is arrived at. It would be better if these words did not appear.

§ Mr. Colegate
I only rise to thank the Chancellor of the Exchequer for having met the objections which many of us had to the Clause as unamended, and to say that the Amendment will be very much appreciated by many of the local authorities who attach a great deal of importance to their statutory rights in this matter being preserved.

§ Mr. Douglas (Battersea, North)
I should like to congratulate the Chancellor of the Exchequer upon this Bill. To those of us who have been concerned in problems of municipal economy for some time, the necessity for dealing with this situation has become apparent. Two years ago when I was opening the Budget of the London County Council I referred to the necessity of preventing wasteful and damaging competition between local authorities for the limited resources which would be available in the capital market. The Bill provides for that situation for a period of five years. There has, during the preparation of it, been frank and free consultation between the Chancellor of the Exchequer and the local authorities, and in the form in which the Bill now is a reasonable accommodation has been made between the various points of view which existed. If the Chancellor of the Exchequer is as fully accommodating in the discussion of the Regulations which have to be made in order to give effect to the most important part of this Measure, I feel sure that local authorities will be satisfied with the result. They have given up a considerable degree of freedom which they have had in the past, and that is particularly true of the larger local 661 authorities, who have been able to finance their capital expenditure by a variety of devices.
I am not one of those who consider that freedom is necessarily uneconomic. On the contrary, in this particular case a number of local authorities have achieved a very considerable degree of success in the management of their financial affairs. The one with which I am connected is only liable to pay an average rate of interest of 3.1 per cent. upon its debt, which is by no means an exorbitant figure. But there is the opportunity by this Measure of effecting, especially in the conditions of the near future, a substantial saving over what local authorities would have had to pay if they had gone individually into the capital market in order to obtain money. We shall have an opportunity in due course of considering what the results of this Measure have been and, in the light of experience, they will then be prepared to determine whether it is necessary or desirable that Clause 1 be continued beyond the period now fixed. The other Clauses of the Bill make very important and permanent contributions to local finances, and there is no dispute, as far as I know, that they are desirable and that they ought to continue indefinitely. Whatever the ultimate fate of Clause 1 may be, this Bill has made a very useful contribution to this important subject.

§ Captain Duncan (Kensington, North)
I want to raise only one question, the same question that I raised on the Committee stage. I could not, at that time, get an answer, and my right hon. Friend the Financial Secretary has not told me since. The question is whether London is covered by this Bill or not. The definition of "local authority" in Clause 9 is: Any authority being, within the meaning of the Local Loans Act, 1875, an authority having power to levy a rate. The London County Council does not levy a rate but issues a precept on the Metropolitan boroughs, and it was not in existtence in 1875. Is my right hon. Friend now in a position to state whether the London County Council is covered by this Bill or not?

§ Mr. Colegate (The Wrekin)
As I moved one or two Amendments and spoke earlier I would like to congratulate 662 the Chancellor of the Exchequer on having brought in this Bill. It is a comparatively small Bill, at any rate small in bulk, but it is really one of the most reassuring things that has happened in connection with the housing problem and also in connection with the vast amount of expenditure which the Education Act is placing upon local authorities. It gives us the assurance that there is to be no repetition of those dreadful 6 per cent. housing loans which hampered the housing programme after the last war. It will be of very great service indeed, and I assure the Chancellor of the Exchequer that it is already widely appreciated that the local authorities can go forward with those great housing, education and other schemes, knowing that by virtue of this Bill and of the arrangements which the Chancellor of the Exchequer proposes to make they will get money at a cheaper rate, on the average than they have ever been able to get it before.

§ Mr. McKinlay (Dumbartonshire)
I want to raise one point which was discussed at some length on Second Reading. I regret that, as this Bill apparently applies to Scotland, there is no Scottish Law Officer on the Front Bench and no Scottish Minister present. It is a question which has disturbed authorities in Scotland, where there is a municipal savings bank in existence. It appears to us that a hardship is being imposed by preventing local authorities from financing schemes within the area of their own municipal banks from that source. I would like to ask the Financial Secretary whether the Government have devised any formula which will clarify the position for those local authorities in Scotland where there is a municipal bank in the district.

§ The Financial Secretary to the Treasury (Mr. Peake)
With regard to the points raised in the discussion on the Third Reading of the Bill, may I say to my hon. and gallant Friend the Member for North Kensington (Captain Duncan) that I have a note on his point. The London County Council is certainly not exempt from the provisions of the Bill. The definition of "local authority" in Clause 9 includes authorities which issue precepts ultimately payable out of rates. The definition in the Local Loans Act, 1875, includes "any 663 authority whatsoever having power to levy a rate." The definition of "a rate" in that Act includes any sum which they obtain in the first instance by a precept and which can ultimately be raised out of the rates; Although the London County Council was not in existence when the Act of 1875 was passed, I am told that that does not affect the application of the definition for the purposes of this Bill.
With regard to the point raised by the hon. Member for Dumbartonshire (Mr. McKinlay), we have given, at various stages of the Bill, assurances regarding the position of municipal banks but, as I have explained before, they vary in character, and we shall have to try to meet their position as far as we can, if not in the Regulations under Clause 1 of the Bill then under the Clause itself. I have been in communication with the Secretary of State for Scotland in regard to certain Scottish banks. We have sent the Regulations to the local authority associations. I can assure the hon. Member that we shall do all we can to preserve the position of the municipal banking institutions. It may be that there will have to be some sort of a ceiling in their lending powers to local authorities, and also that there will have to be some arrangement under which short-term borrowing cannot be applied to long-term purposes. That was a thing upon which, during the Committee Stage, Members of all parties were agreed, but, subject to those two matters, we shall do all we can to see that the position of these municipal banks is safe guarded and preserved. May I thank hon. Members in all quarters of the House for the support which they have given to the main provisions of this Bill? It will, I think, make a very substantial and notable contribution to the solution of some of the post-war problems which are facing us.