HC Deb 15 October 1946 vol 427 cc845-58

Order for Second Reading read.

6.12 p.m.

The Financial Secretary to the Treasury (Mr. Glenvil Hall)

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

The main purpose of Public Works Loan Bills is to authorise a maximum sum of money which may be advanced to the Public Works Loan Commissioners for the purpose of making advances normally to local authorities, until the next Bill is passed. As the House will probably remember, it is only six months ago since we passed the previous Act. That Act authorised the issue of money up to £150 million, and we hoped then it would suffice until the early part of next year, but certain developments have since taken place which have necessitated our coming to the House again. It is an essential part of the procedure for implementing the Local Authorities Act, 1945, that the Commissioners should give their approval, in principle, to proposed loans at a stage when such advances are put to the sanctioning Departments. As the House will appreciate, this is normally a good many months ahead of the time when the money is actually required as a cash advance by the local authority concerned.

Doubts were recently raised as to whether the Commissioners were entitled to enter into undertakings for advances in this way, if such undertakings would cause them to exceed the limits for actual advances laid down by the current Public Works Loan Act, unless Parliament had agreed to the advance. The matter was referred to the Law Officers of the Crown, who have advised us that it is not lawful for the Commissioners to commit themselves to make a loan at some future date in excess of the amount placed at their disposal by the current Act, although they can enter into a provisional commitment, on condition that the money will be advanced only if Parliament agrees to it. We felt that a proviso like this was not fair to local authorities. It is an unsatisfactory method, and it is unfair to local authorities who naturally want to know definitely where they stand. The position has therefore been reviewed, and in the light of the opinion of the Law Officers of the Crown, it has been decided to introduce this Bill. The reason for introducing it now is that if the views expressed by the Law Officers are accepted, the present amount of £150 million is not likely to last us very long. The Commissioners have advanced something like £33 million in cash, have made unconditional commitments to the extent of another £100 million, which the Law Officers of the Crown say is as good as if the cash had been advanced, and in addition have made provisional commitments, subject to Parliamentary sanction, for a further £22 million.

As the House will see, the £150 million is more than exhausted. The matter is therefore one of urgency. We have exhausted the powers conferred by the current Act, and it is essential now that we ask the House to grant a larger sum so that the Commissioners can continue their work. The Bill is a very simple and straightforward Measure. It has only three operative clauses. Clause I proposes a limitation of £250 million to be laid down for advances by the Commissioners before the next Act. It has been very difficult to estimate what sum we should put in the Bill. As I have indicated already, local authorities are coming forward and wanting money for all sorts of purposes, especially for housing. We believe that the £250 million will keep the Commissioners going for some time.

I admit that Clause 2 is an innovation. It has been put in as a result of the opinion recently given by the Law Officers of the Crown. That clause is designed to reconcile the statutory provisions with the procedure of administering the 1945 Act. Under that clause the Commissioners are empowered to enter into a commitment, provided their commitment to advance, when added to the actual cash advances which they have made, does not exceed £500 million. Under the present Act, which will lapse when this Bill is passed, the Commissioners have already entered into commitments, either definitely or for contingent amounts, up to about £130 million. I think that the House will agree that the figures which we have put into the Bill are reasonable.

Clause 3 is designed to remove an anomaly. In 1935 the general provisions as to the minimum rates of interest which could be charged for an advance were abolished, except in so far as housing associations and analogous bodies were concerned. We have taken the opportunity, in this Bill, to bring the law up to date, and to put all bodies which borrow in this way on the same footing. We think it is desirable in view of the lower interest rates that are now being charged, and that it is only fair to those concerned

It is a simple and, I hope, a non-controversial Measure, and I trust that the House will be willing to give it a Second Reading without a great deal of trouble or Debate. We shall be coming back to the Bill on Friday but, meanwhile, I assure the House that we have gone into the matter with the utmost care. The Bill is an urgent one, because local authorities, whatever their political complexion, are coming to the Treasury for advances, and we are anxious, in these times of rehabilitation, to be able to meet them. The Bill will help us to do so for some months to come.

6.21 p.m.

Mr. Osbert Peake (Leeds, North)

This Bill, as the Financial Secretary has just said, is non-contentious but, at the same time, there are one or two criticisms which I feel bound to make about it. In peacetime a Public Works Loans Bill was an annual feature of Parliamentary procedure. It placed certain sums of money at the disposal of the Public Works Loans Commissioners to enable them to make advances to local authorities and to certain other bodies, such as housing associations, and the like. During the war, of course, there was very little lending of money by the Public Works Loans Commissioners, but in 1945 I was associated, as Financial Secretary to the Treasury, with my right hon. Friend the Member for the Scottish Universities (Sir J. Anderson), who was then Chancellor of the Exchequer, and we passed through Parliament the Local Authorities Loans Act, which compels local authorities to borrow all their moneys virtually from the Public Works Loans Board.

Previously, the larger authorities went into the open market in the City, and carried through their issues in the same way as public companies and other undertakings. It was normally only the smaller authorities which approached the Public Works Loans Board. Since the Act of 1945, however, all local authority borrowing has been canalised through the channel of the Public Works Loans Board. That being the position, the Government introduced, in March last, a Bill to enable £150 million to be advanced from the Consolidated Fund and placed at the disposal of the Public Works Loans Commissioners. Introducing that Bill, the hon. Gentleman the Financial Secretary said: We are now likely to find that the annual Bill will be necessary again. That is, reverting to the prewar practice. The present Bill proposes a limit of £150 million…. It is difficult to estimate the rate at which local authorities will call on the Government during the coming year, but it is felt by us that £150 million should be adequate. Then the hon. Gentleman went on to guard himself by the statement: But if that amount is not enough we shall have to come to the House and ask for an additional sum."—[OFFICIAL REPORT, 1st March, 1946; Vol. 419, c. 2298.] It is, therefore, a little surprising that within six months of that Bill becoming law the hon. Gentleman should now come to the House and tell us that the whole of the £150 million has either been advanced or has already been promised, and should ask us to enable the Commissioners to enter into commitments totalling another £500 million. If Members will look at Clause 2 of the Bill, they will see that at any one time the aggregate of the commitments of the Commissioners, plus the actual advances which they shall have made, shall not exceed £500 million. For a Government which is supposed to be the acme of perfection so far as planning is concerned, it is very surprising that they should have estimated the requirements of local authorities at £150 million in March of this year, and should now have to rush a Bill through the House to enable the Public Works Loans Commissioners to advance or to promise a further £500 million.

I really think that this matter requires some more explanation than the hon. Gentleman has given, because the only phrase in his speech which in any way accounted for the enormous increase in the demands on the Public Works Loans Commissioners was that certain developments had occurred. The House is entitled to know, first, how this miscalculation came to be made last March, and, second, upon what objects and for what purposes are these very large sums now to be placed at the disposal of the Public Works Loans Commissioners? I take it that this money is required in the main for housing purposes, but surely the hon. Gentleman must have some particulars of the estimated requirements for different purposes. Are there large sums included here, for example, for the purpose of buildings for education, for new roads, police purposes, and other matters of that kind? How does it come about that £150 million was the estimated figure in March of this year for 12 months, and that now something like four times that figure seems to be likely to be actually required? We on this side of the House will offer no objection to putting this money at the disposal of the Public Works Loans Commissioners. They must have all the money they need, especially for housing purposes, but is it a fact that housing developments are going on more speedily now than the Government anticipated when they introduced their Bill last March, with a limit of £150 million?

What has happened to upset the Government's plan, and to result in a far larger sum being required than they originally estimated? I should further like to ask how long this new sum of £500 million is intended to last. What is the estimated period over which this £500 million will meet the requirements of the Public Works Loans Commissioners? Are we to have another Bill next March, or is this sum intended to last for 12 months from the present time? So far as we are concerned, the hon. Gentleman may by ail means speak again on this Bill because he really ought to give us a little more information as to why this greatly increased sum is now being required.

A doubt was expressed as to whether under the new dispensation, where all the moneys borrowed by local authorities have to come from the Public Works Loan Board, the Board could say to a local authority, "We will promise to advance you the money in three months, six months, or a year's time, when you require it." Clause 2 makes it clear that they can enter into commitments for the future. That seems to be a natural corollary to compelling local authorities to borrow only through the Public Works Loan Board, if you tell them that they must go to only one source for their money, and they have not the alternative of going to the City and raising their money in the ordinary way. It seems quite reasonable that the Board should have power, if it did not have the power before, to say to the local authority, "We will undertake to lend you this money in six months or a year's time." So far as the legal point covered by Clause 2 is concerned, that Clause has our wholehearted approval.

In regard to Clause 3, I fully endorse all that the hon. Gentleman has said about it. When the Local Authorities Loans Act was going through Parliament, 3⅛ per cent. was the lowest rate of interest at which local authorities could borrow for long-term housing purposes. It was, in fact, the rate of interest contemplated in that Bill. Now, an announcement has been made that local authorities will be able to get money at, I think, 2½ per cent. for long-term projects of that character. It is perfectly clear that the same benefit of the low rate of interest can be extended to housing associations as is extended to local authorities, and, therefore, Clause 3 of the Bill will, I think, be welcomed in all quarters of the House.

With these comments, I am prepared to leave the Bill, but, either today or on the Committee stage, I hope that the hon. Gentleman will give us some explanation of how this miscalculation came to be made last March, and explain the main purposes for which the money is now required, and for how long the money which we are placing at the disposing of the Public Works Loan Board is to last be- fore the hon. Gentleman comes to the House for some further requirement.

6.32 p.m.

Mr. Tolley (Kidderminster)

I support the Bill because I realise that the local authorities have, at the present time, to enter into long-term planning. The right hon. Gentleman the Member for North Leeds (Mr. Peake) paid, I think, rather overdue concern to the fact that in March £150 million was suggested as the sum to meet requirements spread over 12 months. It must be obvious to all of us that in March of last year local authorities had not been able, in the short time since the war ended, to get down to intensive planning. For six years, the local authorities had been prevented from entering into any contract in the way of sewage disposal, new water undertakings, etc. They were held up, and now any local authority which is progressive realises that the time has come, and the opportunity is there, to plan ahead. They will be restricted very much, because their financial commitments will be great, unless they are in the happy position of the Government saying, "Here you are, plan your schemes, and, even in long-term planning, we will be able to guarantee the money you require." The sum of £500 million can soon be absorbed.

The right hon. Gentleman rightly mentioned housing. We are all happy in the knowledge that local authorities will be able to develop their housing programmes in more rapid degree, and that under this Bill their schemes will not be handicapped through lack of finance. I think that we can view with satisfaction that the Government desire to give all the financial assistance possible to local authorities to plan ahead and get on with their schemes, and for that reason they have introduced this Bill. As one associated for many years with a local authority, I welcome the fact that, by the changed procedure, local authorities can go to one centralised head to get all the loans they require. The old-fashioned methods of having to go into the City to raise loans afforded no benefit to the local authorities, and, in many cases, they were seriously handicapped. I hope that the House will give unanimous approval to this Measure, because I know that it will be generally welcomed, and enable local authorities to plan ahead and get on with their various duties.

6.35 p.m.

Lieut.-Commander Joynson-Hicks (Chichester)

There is one thing which I wish to say, particularly in view of the remarks of the hon. Gentleman the Member for Kidderminster (Mr. Tolley). We seem to be getting into an atmosphere in which we are agreeable to dispose of the taxpayers' money in very large quantities, for apparently very vague and nebulous purposes, in a very brief space of time, and with very little explanation from the Treasury. I think that it would be as well if we pressed for a little more information from the Financial Secretary as to what exactly are the causes requiring this very large increase in the estimate.

In the constituency which I have the honour to represent, there are a considerable number of local authorities, and one of these, the largest concerned, has never found it necessary to borrow any money. It has financed its way as it went along. It is one of the most up-to-date and efficient organisations in the country. It has, of course, achieved that result by economy and planning.

Economy, I know, is considered rather a novelty nowadays, but older organisations, run efficiently, have only succeeded in being efficient because they have been well planned. If the Treasury would require more local authorities to plan a little further forward, and encourage them towards that end, I think that we would have greater economy. It is all very well, from the Government's point of view, to talk about these large sums of money, but it is the persons that we on these benches represent who have to find the money. As I pointed out in connection with the previous Measure when it was under discussion, it is by no means certain that because the Public Works Loan Board is going to produce a lower rate of interest, and a greater system of economy for local authorities in their borrowing, it is better than the system which was previously in operation, whereby they could either go to the Public Works Loan Board or competitively to the open market in the City. I still hold that opinion, and I think that the principle is bad. As my right hon. Friend who has spoken in this Debate may bear in mind, I opposed the Government on a previous occasion. I am still an unconvinced heretic as to the merits of this particular provision. I feel that if local authorities are being forced into one channel for borrowing purposes, and that the money is being raised in such vast quantities as it has to be raised from the taxpayers in one form or another, and under one system or another, we should have further information and further explanation as to the way in which, and the reasons for which, the Government have so singularly failed to estimate correctly their requirements for a period of six months.

6.40 p.m.

Mr. Glenvil Hall

If I may speak again by leave of the House, I will answer briefly one or two of the points that have been made, particularly from the Benches opposite. I cannot help thinking that the hon. and gallant Member for Chichester (Lieut.-Commander Joynson-Hicks) is under a misapprehension as to what we are trying to do. We are not suggesting in this Bill that money should be taken from the taxpayers; the money will be borrowed by the Government for the municipalities, instead of by the municipalities themselves. That provision was made under the 1945 Act. I was not in the Government then, but I wholeheartedly agree with what was done, because it prevents municipalities from competing in the market against one another and also against the Government. It puts under one hat as it were in an orderly way, the assistance granted by way of loans to local authorities throughout the country. The Public Works Loan Commissioners, in association with the Department concerned, do not fling this money about in a haphazard way to local authorities. If the hon. and gallant Gentleman saw the way in which some of these projects which are brought by local authorities to the Treasury and the Departments are vetted, he would realise that money is not being squandered in the way he imagines.

I will try to answer the points that were put to me by the right hon. Member for North Leeds (Mr. Peake). He is entitled to an answer, and it may assist when we come to the Committee stage if I attempt to give an answer now. The development I mentioned and to which the right hon. Gentleman referred is the discovery by the Law Officers that the procedure which has been followed up to now could not be said to be strictly legal, and that if the Public Works Loan Commissioners promised money, although the money would not be paid over for perhaps 18 months, to the local authority concerned they were nevertheless committed to advance the money and if this went beyond the limits which Parliament had laid down, their act was illegal. That being the position, it put an entirely new complexion on the whole thing, and affected the amount which the House granted last March. At that time, we asked for £150 million, although we did indicate at the time that we were working largely in the dark in naming that figure. As I have indicated, the Public Works Loan Commissioners have used only £33 million in actual cash advances, so that if this difficulty over the procedure had not been discovered, we would not have had to come to the House now in order to regularise the position.

The point is that the Commissioners have committed themselves to lend at some future time—how soon we do not know; some of the money may be asked for quite soon, and much of the rest may not be needed for 18 months—at least another £100 million. That being so, in the light of this opinion by the law officers it is necessary to regularise the position. That is why we have put the facts before the House, and that is why we ask, in the Bill, that until the next Bill is introduced—I do not know who will be at this Box then—the Public Works Loan Commissioners should be allowed to make cash advances up to £250 million and promises up to another £250 million. We ask for that sum because this Fund is now the only channel through which these authorities can borrow, and they are now, quite properly, beginning to come in increasing numbers for their housing schemes, and so on.

The right hon. Gentleman wanted to know whether there were other things which we had not disclosed for which the money is wanted. The authorities come to the Departments, they put their case before the Departments, and what they want is either agreed to, turned down, or modified. They ask for money for a variety of schemes. What those schemes may be it is impossible for me to say, but as far as I know, the vast majority of them will come to the Government for money to assist them to build houses. Later on, I have no doubt some of them will be coming for assistance for the provision of schools, but at the moment, their chief preoccupation is housing. It is for these reasons that we ask the House to agree to the Second Reading of the Bill. When we come to the Committee stage there will doubtless be criticisms of individual Clauses, but nevertheless we believe that the general proposals we made in the Bill are reasonable and we hope commend themselves to the House.

Mr. Peake

Could the Financial Secretary say, first, that he adheres to his original estimate of £150 million as regards the amount that will be issued during the 12 months from last March, and secondly, will he give some indication of how long a period is intended to be covered, by the sums to be granted now?

Mr. Glenvil Hall

To answer the second point first, it is difficult for me to give a categorical reply. I wish I could do so. As the right hon. Gentleman knows, since he once occupied the office of Financial Secretary, it is very difficult to make an estimate with any degree of accuracy in a situation such as that which now faces us. The provision of housing, schools and hospitals, and the changes to which not only this Government but preceding Governments committed themselves, will undoubtedly increase as materials become available and manpower returns from the Forces. It is therefore difficult to say how long the amount for which we now ask will last, but my guess—I think it a not unreasonable one—is that the amount now asked for should last at any rate until this time next year. The other Act of course stops dead immediately this Bill becomes law. Therefore, any commitments agreed to under the old Act will have to be carried on the new £250 million, plus £250 million, making £500 million in all of the present Bill. It is hoped that we shall not have to come to the House with another Bill of the same kind for another year.

6.48 p.m.

Mr. A. Edward Davies (Burslem)

I wish to say a few words in support of the Bill. I cannot understand the apprehension expressed from the benches opposite, either with regard to the amount involved, or the length of time it is intended to cover. I should have thought that any progress in the way of local municipal development in terms of housing, education, and the rest of the social services, ought to be encouraged. As the Financial Secretary so clearly told us, with the return of men from the Forces, with the setting up of staffs and the building up of reconstruction committees, it was quite impossible, as early as March of this year, to get anything like a guide as to the sum of money that would be involved, and it is only now, as I can say from my knowledge of the local authorities in my area, that we can be said to be getting down to some of the long-term plans.

I think it is reasonable that local authorities who are unable to embark immediately upon schemes involving the expenditure of this money should, while the opportunity for borrowing money at reasonable rates of interest is available, lay out their budgets on long-term lines. In the matter of education for example, there has to be a complete rebuilding. I am encouraged to think that the Government, in fulfilment of their policy and principle of making cheap money available to local authorities, especially the poorer ones, are proceeding with this Measure. I can think of no better investment than to encourage our poorer local authorities to replan their areas and give the people who richly deserve so many amenities some of the things we have spoken of for so long and of which they have been long deprived. I believe the Loans Bill of 1945, in centralising the pool in which money should be available, was a good Measure. I know it was welcomed by the poorer authorities who had to compete, very often at a great disadvantage, with the better off authorities, and I hope that we shall, in the course of time, spend not only this £500 million which we are discussing today but many more, because there seems to me to be no finer outlet for the capital resources of this country.

6.51 p.m.

Sir William Darling (Edinburgh, South)

This is a matter which concerns local authorities and local government, and I should like to express my disagreement with the attitude of the Government. I believe that easy finance is bad finance. It is not a good thing to encourage people to borrow money and it is not a desirable thing to encourage local authorities to indulge in expenditure for which they perhaps have doubtful justification This picture of a centralised finance from the great financial policy of the existing Government is not one which presents any ready appeal to me. I happen to be a member of a local authority which could go to the Stock Exchange, or to the public at any time and get all the money it wanted for all purposes, and that authority is now running a great capital city at probably the lowest rate burden in the United Kingdom, 8s. 2d in the £. Under the present device there is no guarantee that the money will be spent in a wise fashion and I am grateful to my hon. Friend for striking the note of the negative.

Much is said against the Stock Exchange, but what is the Stock Exchange? It is a court where persons can take the commodity they have to sell and have it assessed at its proper value. If a local authority is extravagant and incompetent in its management it gets a very chilly reception if it goes to the Stock Exchange, and has to pay six, seven or eight per cent. for its money. If it is a prudently managed local authority it gets its money for three per cent., two and a half per cent., or even less. This device which I agree His Majesty's Government have inherited from their predecessors, is a device to make doubtful finance easy. It is a device to place money in the hands of people who believe in easy come and easy go, but no doubt this House will approve the Measure because its grandiloquent manner makes that almost certain. Two hundred and fifty million, 500 million, even 1,000 million—these are the figures which delight His Majesty's Government because they are, apart from the first digit, all round O's and to that extent mean either nothing or much. I belong to the old fashioned school of finance which believes that there cannot be any cheap money. So called cheap money is bogus money. The price of money today is not 2½ per cent. at all; the real price in a free market is a good deal more, but owing to devices and manipulations it appears otherwise. This kind of Measure is placed before the House but it cannot be put through without one or two voices being raised against it.

The centralised planning in Clause 3 is a device, I repeat, to facilitate borrowing by persons who would not otherwise have borrowed and who are only borrowing because the facilities are made easily and readily available to them. Money should not at any time be easily come by; it should be worked hard for and planned hard for, not raised by inflationary devices and centralised methods of this kind. I am against any policy which makes it simpler. I detect in Clause 3, too, something which perhaps the Financial Secretary or some other hon. Gentleman opposite can elucidate. It is the repeal of the provision as to the minimum rate of interest on borrowing. All restriction is removed in this matter and while I have no doubt that it is thought hopefully that in the future 3⅛ per cent. and not 2½ per cent. will be the price, when this Clause is passed there is no guarantee that that will be so. If all restriction is removed I take it that it may be two and a half per cent. or one per cent., or that the money may even be loaned for nothing. On the other hand, it might be lent at five per cent., six per cent., or even seven or eight per cent., and I personally should prefer to see some statement as to what is the price at which money may be borrowed. I am conscious of the fact that these are probably exceptional views but they represent the reflection of my personal and public experience that prudence, carefulness and thrift in the management of public money are a public duty and I see no signs of that public duty in this Measure.

Question put, and agreed to.

Bill accordingly read a Second time.

Bill committed to a Committee of the Whole House for Friday.—[Mr. Joseph Henderson.]