HC Deb 28 November 1951 vol 494 cc1525-96

3.50 p.m.

Mr. Eric Fletcher (Islington, East)

I beg to move, in page 1, line 8 at the end, to insert: at interest rates not exceeding those prevailing on the sixth day of November, nineteen hundred and fifty-one. As you will be aware, Sir Charles, the main purpose of this Bill is to authorise the National Debt Commissioners to make available to the Public Works Loan Commissioners for loans to local authorities the sum of £500 million, and it also permits the Commissioners to increase the aggregate of their actual loans and commitments to a total sum of £950 million.

I think it would be agreed on both sides of the Committee that this Bill would have been relatively uncontroversial but for the fact that on 6th November, following the speech in the House in the debate on the Address by the right hon. Gentleman the Chancellor of the Exchequer, a Treasury Minute was issued which has since been published as Statutory Instrument, 1951, No. 1955, the effect of which was to bring about the automatic increase on all loans to local authorities by the Public Works Loans Act of substantially higher rates of interest than those prevailing on 6th November last.

The rates of interest vary in accordance with the period for which the loans are granted by local authorities, but by far the most important of the increases made in the rates of interest charged is that whereby for all loans of more than 15 years the rate of interest was suddenly increased by the Government from 3 per cent., at which it had existed for a substantial period, to 3¾ per cent. I do not desire to traverse at any length the arguments addressed to the House on the Second Reading of the Bill, but it will be obvious that if the Government are prepared to accept this Amendment, as I hope they will, then the main source of criticism against the Bill will disappear.

I do not think it is any exaggeration to say that when the Chancellor announced his intention to increase the rate of interest charged to local authorities from 3 to 3¾ per cent. something like consternation was created throughout the country. I am not sure whether the Committee realises that there is always a considerable time lag between the time at which local authorities obtain from the Public Works Loan Commissioners sanctions to borrow for housing, education, and other social purposes, and the moment at which they actually borrow the money.

It so happens that on 8th November, when the rate of interest was suddenly increased by such a large amount, the Public Works Loan Commissioners had already sanctioned some £420 million of loans to various local authorities. The effect of the change in the interest rate will be that this higher rate of interest will operate not only on all these new advances, but on the whole of those commitments amounting to £420 million which local authorities were authorised to take up and which they will be taking up as a result of that authorisation.

The effect of this increase in the rate of interest, as was pointed out during the Second Reading debate, must be one of three things in the field of housing alone. It must either involve a considerable increase in the rates which will have to be raised by local authorities or it will involve the Government in making up, by way of subsidies, the additional amount which will otherwise be charged to local authorities, or, again, it will involve a large increase in the rents which local authorities will have to charge to tenants of the houses and flats which are being built.

During the Second Reading debate we were unable to obtain any assurance from the Government that the amount which is being lost to local authorities by these increased charges will be made good by subsidies. In fact, the Chancellor said that the subsidies would be reviewed in consultation with the local authorities and that this increase in rates would be one factor, and one factor only, in that discussion. It is most significant that the spokesmen from the Government Front Bench signally failed to give any kind of assurance that the review of subsidies would compensate the local authorities for the additional sum they will now have to raise.

I think it would indicate the magnitude of the additional burden that will fall upon local authorities if I reminded the Committee that the result of putting up the interest rate from 3 to 3¾ per cent. is that for every £1,000 which local authorities have to borrow, they will now have to repay not merely £2,168, as they would if the rate remained at 3 per cent., but £2,527, which means that for every £1,000 borrowed the additional repayment at this higher rate of interest will be £360.

In view of what was either stated or implied by the Government Front Bench, last Friday it also follows that these increased rate charges will mean an addition to the amounts payable by tenants of local authority houses of something like 5s. a week depending, of course, upon the cost of the house. If one takes the standard cost of a house or flat in the London area, the additional burden placed upon the tenant will be of the order of 5s. a week, and in some cases it may be more.

4.0 p.m.

To indicate how widespread the increased burden will be, one has to bear in mind that the burden will not merely fall upon the tenants of all new council houses. Owing to the fact that a good many local authorities follow the practice of spreading the rents they charge over the whole of their housing operations, the increased rents, or some of them, are likely to fall upon all tenants of all council houses in the country. I hope that the Government spokesman will tell us whether that is the deliberate intention of the Government's policy.

We understood from the Minister of State for Economic Affairs on Friday that it is now the policy of the Conservative Government to make great and grave cuts in expenditure on the social services. The additional burdens which will fall on housing are only part of the cut which will follow in the social services, because, however the Government may try to compensate local authorities for what they will lose on housing, there is no suggestion of any kind that there will be any compensation for the additional burden which will fall on local authorities in the realm of education, land drainage and all their other social activities.

I gathered from what was said by the Minister of State for Economic Affairs last Friday that this is the chosen instrument of the Tory Party for bringing about cuts in the social services, and the object of the Amendment is to ensure that the Government live up to their Election pledges and do not reduce the social services. I hope that the Amendment will be accepted by the Government in the terms in which it now appears, because it is only in this way that the Committee and the country can have any assurance that our social services will be preserved by the Government.'

Mr. John Edwards (Brighouse and Spenborough)

I rise to support the Amendment and to urge upon the Government the great need, to reconsider their attitude. It is not in order today to discuss the broad monetary policy of the Government from which this decision flows, which we regard as wholly misconceived and likely to hinder rather than help our economy. However, when the Government change the interest rate from 3 per cent. to 3¾ per cent. for all local authority purposes, issues of such importance to local authorities are raised that many of us want to raise our voices in protest.

My hon. Friend the Member for Islington, East (Mr. E. Fletcher), drew special attention to housing, and on Friday the Financial Secretary told us that housing was the largest single item, being larger than all the other items taken together. It is clear that the final effect of the proposal must be felt by the tenants of council houses. Whether it will be felt by future tenants or present tenants is anybody's guess, because the situation will vary from locality to locality, depending on how the local authority arranges its rents.

There is a side issue concerning loans by local authorities to those who buy their own houses. Under the Housing Act and the Small Dwellings Acquisition Act local authorities have been lending money to those who wish to buy their own homes at the rate of one quarter of 1 per cent. above the prevailing rate of the Local Works Loans Board; that is, they have been charging 3¼ per cent. The effect of the change means that such people will have to pay 4 per cent. I know that the great bulk of the financing of the buying of houses is not done by the local authorities, but if hon. and right hon. Gentlemen opposite are really serious in their desire that people shall buy their own homes—I gather we are still to await the details of the conditions relating to house purchase—it may well be that in the future there will be. greater need for local authority assistance than in the past.

I have not made an estimate, but it is clear that the effect of the increased repayment which will have to be made by those who borrow from the local authorities will be to cut out a certain number of people who might otherwise be prepared to buy their own houses. I believe that this will be of such an order as to make the housing powers which local authorities now possess in respect of loans to would-be buyers of their own houses very much more difficult to operate, and I believe that the would-be buyers will be fewer than would otherwise be the case.

As to other services, it is clear that the increase in the interest rate must mean one of two things, that less work will be done or that the rates will rise. We have yet to see the shape of things to come in the field of local government economies, but, whatever the Government do, it will take time for the economies in the investment field to come into operation. Meantime, I am certain that the increase in the rate of interest will have the effect of increasing the rates to be paid by citizens all over the country.

I would remind the Financial Secretary that this has a consequence for the Exchequer as well, because, in a sense, the Exchequer is a ratepayer in every area to which a block grant is paid. Not only will rates go up but there will also be an increased charge on the Exchequer merely because of the increase in the interest rates. Without going over old ground again, I urge the Government seriously to reconsider the matter. I cannot believe that the Government get any advantages from this. They will discourage the local authorities, who have been doing their best in very difficult circumstances, and, unless second thoughts prevail, the final result may be disastrous.

Mr. Charles Pannell (Leeds, West)

The more I investigate the matter the more I appreciate how untenable is the Government's position, particularly in the sphere of housing. When the Committee deals with local authorities it tends to think in terms of counties and cities. I want to bring attention to the non-county boroughs, where the field of housing is the largest field left to them. In 1938 when I introduced a local budget in a non-county borough we controlled 54 per cent. of the expenditure of the rate demand, but 11 years afterwards that non-county borough controlled only 27 per cent. of its own expenditure, and the housing powers were the most considerable powers left to it.

During the Second Reading debate, on Friday, I gave some figures relating to 'borrowings under the Small Dwellings Acquisition Act, which has been mentioned by my hon. Friend the Member for Brighouse and Spenborough (Mr. J. Edwards). I do not imagine that many people borrowing under that Act can be getting houses under £2,000 at present, and certainly not in London. Yet at 3¼ per cent. the annual charge would be £137 and, at 4 per cent., £146, which I make a 7½ per cent. increase.

The Financial Secretary said that he did not like the idea of a "hidden subsidy" and that he thought that local authorities ought to have money at the same borrowing rate as the Government. However, he will know that under the Small Dwellings (Acquisition) Act, local authorities are compelled to lend money at a quarter of 1 per cent. above their own borrowing rates. I believe that the same formula applies even in the case of the Housing Act, 1949, under which individual cases come before the Minister.

The Annual Report of the Board for 1950–51 reminds us that, to reduce the call by local authorities on the resources of the Board, or to postpone calls for as long as possible, local authorities finance their own capital expenditure from temporary surpluses of internal resources for such time as is considered prudent and from temporary borrowings on short-term at low rates of interests, within the permitted regulations. When a local authority embarks on a house building scheme, following the receipt of the loan sanction from the appropriate Government Department, it proceeds to finance the capital expenditure incurred on the scheme by raising short-term money at rates of interest between 1 and 1½ per cent.

This has the effect of reducing the charges on the housing revenue account during the period when large sums of money are being paid out but no rents are coming in. Before the advent of the 1945 Act, some local authorities used to raise about 10 per cent. of their loans in short-term money. It cost them a considerable amount of money when the 1945 Act was introduced.

In view of the Government's secrecy as to their ultimate intentions—the Government ought to tell us what they propose to do about monetary policy—local authorities are now faced with the problem whether they should abandon their present policy and proceed to enter into mortgage loans from the inception of the scheme, which would involve them in very substantial interest charges. All this uncertainty has a very disturbing effect on the authorities who are considering their schemes. I am of opinion that there should be an early announcement by the Chancellor of the Exchequer, and I consider that it should have been made at the beginning of the proceedings on the Bill. Local authorities knew where they were when the previous Government was in power. No one is now in a position to pre-determine what shall be the attitude of the local authorities to this, but, as I indicated on Friday, if the suggestion from the Government is that any part of these increased charges is to be paid by the local authorities, the local authorities will take that very unkindly indeed.

In giving figures relating to the City of Leeds last week I tended to underestimate. I computed my figures on the basis of the actual subsidy. However, as the Financial Secretary knows, local authorities can, to a degree, fix their own subsidies, and I found that the figure was higher than the one I gave, and that it was I ld. in Leeds, and not 9½d. I also said that the average cost of repairing houses in London now was about £18 a year. I notice that the figure is not very much lower in the provinces. I understand that the annual repair charge for housing in Leeds is £15 8s. ld. I draw to the attention of the Financial Secretary the fact that from deficits on the housing repairs funds arises the cause of all the troubles concerning the rents of pre-war houses. The hon. Gentleman need only refer to the Reading case.

4.15 p.m.

There is one other aspect of this matter I should like to deal with shortly. On page 11 of the Report it shows that the fees received during the year 1949–50—the Report does not show the year 1950–51—from local authorities irrespective of Stamp Duties was £586,000 14s. 11d. and the expenses of the Board for the same year totalled £68,576 10s. 11d. Therefore, the profit made by the Board on fees was £517,444 4s. 0d. which was credited to the Exchequer. The Chancellor of the Exchequer might very well give an undertaking to review the Public Works Loans Fees Regulations at an early time with a view to relieving the local authorities of this sort of heavy burden, which is imposed upon them by the taking up of loans and making premature payments of amounts borrowed.

We heard a lot on this subject on Friday, and I still think we find ourselves in a dilemma through no statement coming from the Government on the subject. In view of that we are bound to say that this Bill will have the effect of increasing the rates already too high and also of forcing up the standard of living, making it more difficult for people who want to buy their own houses. By this act alone the Government are moving forward to that deflationary policy, which has always been favoured by hon. Members opposite and which, at the end, will bring us a full sized pocket of unemployment.

Mr. A. Blenkinsop (Newcastle-upon-Tyne, East)

I quite understand the very deep interest of hon. Members on this side of the Committee in this question of housing and the rents which the tenants will have to pay. I am a little shocked that not a single hon. Member on the other side of the Committee, many of whom spoke about rents when they sat on this side of the House, has the courage of his convictions to get up and say a word, all the more so when one considers that in the case of each of their constituencies this problem will be a real one within a short period of time.

I would just mention the effect of this proposal in the constituency of the hon. Lady the Member for Tynemouth (Miss Ward) who, unfortunately, has just left the Committee but who, I am sure, will be eager to speak on this subject later. have been informed that in the new block of flats which are about to be built in her area the rents will increase by 4s. to 4s. 6d. a week unless there are satisfactory increases in the housing subsidies.

I want to draw the attention of the Committee to a very serious matter. We are not only considering the effect of these loans upon housing, but upon other local authority activities. I remember how anxious hon. Members on the Government side of the Committee were, when in Opposition, to ensure that proper water supplies would be available and that proper sewerage schemes were carried out. There were regular questions and great anxiety displayed by them on this very real and serious issue. It is not very much use providing new houses for our people if we are not able to provide them with water supplies at the same time. I should have thought that many hon. Members on the other side of the Committee, who represent rural constituencies, would be particularly concerned about this matter.

When I look at the 76th Annual Report of the Board I find that while the loans for housing purposes far outweigh any others for other local Government activities, it is still true that those for water supplies and services came to the sum of £19 million in the last financial year. It is a matter of very serious concern indeed to the local authorities that here, at any rate, there is not even any offer of subsidy to help compensate for the extra charges which they will have to face.

I should like to ask the Financial Secretary whether it is possible to agree that the local authorities when they come to discuss this matter—I am not sure whether they are now discussing it or not—with the Ministers concerned, that they would be able to raise not only the added charges that are facing them on their housing loans, but also the added charges that would face them on such matters as water schemes and other matters of equal concern. I hope that my hon. Friends will press this issue very strongly, because there is no doubt at all that there will be increasing feeling throughout the country on an issue, where there will be general agreement that the Government have taken the first possible opportunity to let down the very people that they have always claimed they represented.

I hope there will not be any question about the intention of hon. Members on this side of the Committee in pressing this Amendment as vigorously as possible. I trust that before long we shall have some information from the other side of the Committee, if not from the Minister responsible at least from some of those who sit with him on the Government Front Bench to show that they are still somewhat interested in the issues which are the concern of this Amendment.

Mr. R. Ewart (Sunderland, South)

I want to mention one or two points which arise from the proposed increased rates, particularly as they affect my constituents in north-eastern England. I want to preface my remarks by suggesting that Parliament might be informed of the broad outline of policy of the Minister of Housing and Local Government on the question of increased loan charges, and that that matter will be mentioned at the suggested conference which will take place in January.

Of the many actions already taken by this Government which will increase the cost of living, their action about the loan charges is having the most disturbing effect in the country, because it hits at the very centre of our social service system and, in addition, it places local authorities in the dilemma of having to accept the one of two alternatives. Either they have to increase the rates in their area, which, in many cases, are large enough, or they will have to increase rents over the whole field of housing, particularly in those areas where the local authorities follow an equalisation course as so very many of them do.

I feel that the Minister of Housing and Local Government might tell us something of the policy which he proposes to pursue in the future because of this change in housing policy. Surely the Government, having agreed to increased interest rates, should have in mind what line they propose to pursue in their approach to the local authorities. It might very well have the effect in many districts, particularly in my constituency, that the very fine performance of house building, such as has been accomplished by Sunderland Corporation, who have built to date over 5,000 permanent houses, will have to slow down, or, alternatively, the shipyard and the factory workers, in the main working for moderate wages, will have to pay an increase in rent amounting to about 4s. a week.

Such a problem is vital both to the local authority and to those whom we represent. Yet we have had no communication at all from the Government as to what steps will be taken to relieve the local authorities of this additional burden. The only indication we have had as to what policy is to be pursued is that given by the hon. Member for Peterborough (Mr. Nicholls) who spoke on this subject on Friday. He said that because of the policy of the Government we should have to build houses of a lower standard than the present ones. He argued that though the cost would be lower the amount saved by the local authority would not be used to reduce the rents, but would offset the impact of the Government's proposals to increase interest rates.

In other words, the local authorities are being advised by the hon. Member to pursue a policy that would not increase the rents to the tenant, but which will give to the tenants for the same amount of rent an inferior dwelling to those erected since the war. Surely the Financial Secretary to the Treasury can tell us if that is the course which is to be pursued by the Government, and whether that is the line which will be taken by the Minister of Local Government and Housing when he meets the local authority representatives at the forthcoming conference.

The Chairman

We cannot, on this Amendment, go into any great detail about the standard of housing.

Mr. Ewart

But the fact that the Government's policy is going to bear so heavily on local authorities in their housing schemes leads me to raise this issue now, Sir Charles. It is a serious issue for it may well lead to a slowing down of the programme of the building of houses and to a different and lower standard of housing without any reduction in rental charges.

In view of your Ruling, Sir Charles, I do not want to develop the point too far. But I believe it will have a vital effect on the housing authorities of this country. They are to discuss this matter with the Minister at a conference in the near future, but my view is that Parliament should have been advised of the outcome of the consultations which have been taking place between the Departments concerned and between the Minister of Housing and Local Government and the Treasury. Then we would have been able to estimate the Government's policy when it meets the local authorities in January.

Mr. James MacColl (Widnes)

My hon. Friends who have already spoken on this Amendment have laid emphasis on the very harmful effects which any increase in the rate of interest will have on the housing authorities and the problems with which they have to cope. I entirely agree with my hon. Friend the Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop) that it is shocking—the relations of the new Government with the local authorities should have been begun so badly and that the local authorities are faced with a problem of this dimension. But I do not want to develop that point. I want to try to ascertain from the Government what are the real reasons which have prompted them to propose an increase of this sort.

It is because of my profound distrust of those reasons and my feeling that the Government are very woolly-minded on this matter—if I may with great respect use the phrase—that I support the Amendment, which proposes to tie them down to the existing rates of interest. It seems to me that the best statement we have had of the reasons behind this Amendment were those extracted from the Minister of State for Economic Affairs by my hon. Friend the Member for Stechford (Mr. Roy Jenkins) during the debate on Second Reading.

4.30 p.m.

Everybody on this side of the Committee will feel profound regret that the right hon. Gentleman the Minister of State for Economic Affairs, is not able to assist us this afternoon on this very complicated and difficult matter. I can only hope that hon. Members opposite are as disappointed as we are at his absence. With his usual lucidity, he would have led us through this rather difficult question. Speaking on Second Reading, the right hon. Gentleman said: May I clear up this point? The primary object of this particular change is what may be called 'tidying up'—getting back to a real basis, and to see that the subsidies that are given are clearly visible and measurable, and not containing an element of concealed subsidy."—[OFFICIAL REPORT, 23rd November, 1951; Vol. 494, c. 790.] I hope that an hon. Member opposite with a grasp of these matters, possibly the Financial Secretary, will explain, in simple language, at what level the rate of interest has to be for it to cease to be a concealed subsidy. What magic is there in the figure now being proposed? Most people are under the impression, I think, that it is a simple problem of arithmetic: the Government borrow a certain amount of money at a rate of interest and lend it to the Public Works Loan Board who, in their turn, lend it to the local authority; and, therefore, to avoid a concealed subsidy we fix the rate of interest at the rate at which the Government borrow the money in the first place.

But that argument was completely deflated by my hon. Friend the Member for Battersea, North (Mr. Jay) on Second Reading, who pointed out that the money used for this purpose was either not borrowed at all or, if it was borrowed, then it was borrowed as short money at a very much lower rate of interest than that at which the Public Works Loan Board lend to local authorities on a 60-year term. That simple argument, therefore, collapsed.

The right hon. Gentleman then produced what we might call a sort of "opportunity-cost" theory—that the rate of interest at which we had to lend money was the rate fixed by the alternative uses to which we might put that money if we had not had the embarrassing difficulty of having to help local authorities to build houses. If that is the theory, then, again, my hon. Friend the Member for Battersea, North, pointed out that by lending money to development areas the Government can get 4 per cent. Why not fix the rate of interest at 4 per cent., therefore, if opportunity-cost is to fix the rate of interest? Why stop at that? The Treasury might be able to put all the money on a horse at 100 to 1. I am certain that the Financial Secretary, with his usual skill, would be able to devise an appropriate use of the money for that purpose. There is no limit to the alternative uses to which we might imagine we could put the money.

It is clear, therefore, that there is no fixed rate of interest at which the Government must lend this money in order to avoid a concealed subsidy. In fact, there is no such thing as a concealed subsidy of this kind at all. In default of some rather more clear explanation from the Government of what is the economic basis behind their argument, I think there is no case at all for the Committee to reject this Amendment. If the Minister of State for Economic Affairs could not give us an adequate explanation, I do not think it is likely that anyone else will succeed in doing it on behalf of the Government.

Having put up this curious argument about the concealed subsidy, the Minister of State for Economic Affairs went on to what I am sure most of us on this side of the Committee were uncharitable enough to feel was the real reason for this proposal. Again, he put it with his usual clarity when he said: this Measure…must be related to the general financial policy of the Government as explained by the Chancellor of the Exchequer the other day."—[OFFICIAL REPORT, 23rd November, 1951; Vol. 494, c. 790.] And, of course, as expanded and expounded by the right hon. Gentleman on Second Reading, the object was to increase the cost of house building in order to reduce the enthusiasm of housing authorities for housing construction.

If that is the policy, if it is to be a disinflationary policy, I think we are entitled to ask the Government to be quite clear in explaining to us what they are trying to do. Is it their policy, by physical controls, to give housing a priority limited only by the shortage of building resources—to give the fullest possible facilities to local authorities to build houses; is that their policy? Or is their policy, by using financial controls, by the use of the interest rate as an instrument of economic policy, to see that local authorities are discouraged from building houses?

We must have an answer to that question before we can dispose of this Amendment. We cannot give the Government carte blanche to do what they will with the rate of interest until we know what is their policy on housing subsidies, because if their policy on housing subsidies is, on the one hand, that they intend to raise the price of houses but will provide the local authorities with the money to pay that price, then it seems to me that the whole procedure is extraordinary and futile and has no justification at all except on the rather curious argument about a concealed subsidy. If, on the other hand, the object of the Government is not to give a subsidy to an amount equivalent to the increase in the loan charges; if it is their object to increase the cost of housing to local authorities, as the hon. Member for Peterborough (Mr. Nicholls) quite clearly thought was the Government's policy, then we should be told so quite clearly and categorically.

It is absurd that we should be asked at this stage to pass the Bill without an Amendment of this sort to safeguard the position of the local authorities. It is absurd that we should be expected to pass the Bill in its original form without the Government making clear what is the theory behind this proposal and what will be their subsidy policy, upon which will depend the whole effect of raising the rate of interest. If we do not know the subsidy policy of the Government, then we shall be agreeing to an increase in the rate of interest quite blindly and without any clear idea of why we are doing it.

We should be doing it without any clear idea of what the Government are trying to do and without any clear idea of what the effect will be on local authorities. We should be false to our duty and our trusteeship to the local authorities if we weakly permitted a thing like that to go through without being able to get from the Government a clear and positive statement of what they are trying to do.

The Financial Secretary to the Treasury (Mr. John Boyd-Carpenter)

As we are in Committee it may be for the convenience of the Committee if I seek. at this stage, to reply to some of the points which have been made from the benches opposite. As I understand, this Amendment is intended in substance to be a method of reversing the decision of my right hon. Friend the Chancellor of the Exchequer to effect certain alterations in the rates of interest paid by local authorities on loans issued to them by the Public Works Loan Board.

It is true that the hon. Member for Islington, East (Mr. E. Fletcher), who moved the Amendment, suggested that it should be accepted in terms. But quite apart from the main issue, with which I shall seek to deal in a moment, that would be completely out of the question, in view of the terms in which it is drafted. The Amendment seeks to add certain words to line 8, and if hon. Members will look at the text of the Bill they will see that, with the Amendment, it is far from clear whether the limitation which it is sought to impose upon the rates of interest chargeable on loans relates to moneys issued by the National Debt Commissioners to the Public Works Loan Commissioners or to loans issued by the Public Works Loan Commissioners to the local authorities. What the result would be is far from clear, although I have no doubt, from the speeches I have heard, what the intention would be.

Mr. Douglas Jay (Battersea, North)

As a matter of grammar, I should have thought that it clearly means the latter, but if the hon. Gentleman will accept the substance of our proposal we shall be very glad to accept his drafting.

Mr. Boyd-Carpenter

I have already indicated to the hon. Gentleman, to whom I think it will be no surprise, that these comments are quite apart from the question of the merits of the matter, on which I shall seek to detain the Committee for a few minutes, a little later. I was merely pointing out that the Amendment of the hon. Member for Islington, East, is in terms which, at the very least—at the, most favourable to him—are ambiguous, when we consider what the effect will be. I do not base my objection to the Amendment on this purely procedural and drafting point, however. I have had far too much experience of drafting Amendments without the assistance of the staffs available in Government Departments ever to adopt that line against hon. Members opposite.

It may be possible in the course of this discussion to put the merits of this matter a little more into proportion than has seemed to be the case so far and than seemed to be the case in the debate on Friday. To listen to some of the speeches which have been made one would have thought that raising or lowering the rate of interest on these loans was a very rare operation. Indeed, one hon. Member sought to impute rather curious motives to it.

It may help to put the matter more into proportion if I point out to the Committee that since the original Public Works Loans Act of 1897 the rate of interest on these loans has been altered on no fewer than 42 occasions, under a whole variety of Governments. With those 42 variations, the rate of interest has ranged from 61 per cent. down to 2 per cent. An alteration has taken place on 42 occasions, up or down, during the last 55 years.

Mr. MacColl

I know that the hon. Gentleman appreciates this point, but he should make it. Until the 1945 Act was passed local authorities could borrow in the open market. The rate of interest was, therefore, very closely linked to some ascertainable ratio. That is not the position today.

Mr. Boyd-Carpenter

I fully appreciate that, but the hon. Gentleman will understand that the facilities offered by the Public Works Loan Board have been of the greatest value to local authorities and that local authorities have made use of those facilities over a great many years. If such disastrous consequences as have been suggested this afternoon would occur from any rise in the interest rate, it is surprising that those consequences have not occurred before.

The hon. Member will also appreciate that the effect, in all probability, is even less than it was before the Act of 1945. Before that, as he says, the local authorities could go to the market. Therefore, if the rate fixed by the Treasury was out of relation to the market rate—was too high—they would go to the market; and it must be a fact that the terms offered by the Public Works Loan Board kept fairly closely in touch with the market. The changes in the rates at which local authorities could borrow during that period are, in fact, adequately reflected in the figures of the rates of interest of the Public Works Loan Commissioners. They must, in fact, have kept very closely in touch or the local authorities would have gone to the market.

4.45 p.m.

It is a fact that there have been occasions when the rate has been as high as 6½ per cent., and it is a fact that hon. and right hon. Gentlemen opposite, when they have been in office, have moved the rate upwards. I shall come in a few moments to the occasion when they did so in 1948, because I think it is extremely material not only because they did so, but because of the reasons which the then Chancellor of the Exchequer gave for their doing so. But they did so also in 1929, when, on 14th October, they raised the rate not to 3¾ per cent. but to 5¼ per cent.

Therefore, it really does seem that we are not discussing something with sinister implications rarely done in the history of this country. We are discussing a thing that has been done by every sort of Government, Conservative, Liberal and Labour, for a period of 50 years. I think it is material to get out of one's mind the feeling of perfectly natural and perfectly understandable excitement which this matter does seem to have aroused in the minds of a certain number of hon. Members opposite.

Indeed, the only difference, as I see it, in our handling of the matter is this. On this occasion this Government, unlike their predecessors, have coupled with the rise in interest rates a bringing forward of the talks with local authorities on the rate of subsidy. If there were any occasion on which one need not feel undue alarm it should surely be on the occasion when what has been done many times before by all Governments is done with, in addition, the special safeguard of the acceleration of the subsidy conversations with the local authorities, and with those conversations coupled with the action taken.

Mr. Leslie Hale (Oldham, West)

We really must have this point cleared up. Is the hon. Gentleman now suggesting that the subsidy will roughly be equivalent to the extra charge of the housing bill of the local authorities? If so, why did he talk about a rise of about 3s. 6d. in the rent of council houses as being a mechanical matter? Will a copy of the hon. Gentleman's speech be sent with the notices of the increase in rents? Or what is the method by which it is suggested that this point of view may be conveyed to the people who have to give up their homes because of increased rents?

Mr. Boyd-Carpenter

The hon. Gentleman, I hope, knows me well enough not to believe that I should fail to deal with the questions raised from his own side of the Committee on that aspect of the matter. I hope also he knows me well enough to know that I do prefer to deal with this in an orderly manner. However, I will give him this assurance, that before I sit down I shall have discussed all aspects of the matter. I do hope that the hon. Gentleman, as a responsible Member of this Committee, will not, as he did a moment ago, seek to cause alarm and despondency by statements of that sort. I hope he will not, because the hon. Gentleman knows that what he says here and outside is listened to with respect by a lot of people.

Mr. R. T. Paget (Northampton): rose

Mr. Boyd-Carpenter

No, I am not going to give way again on that.

Friday's debate did, therefore, seem a little out of proportion. This is not, as the hon. Member for Islington, East (Mr. E. Fletcher), said, the chosen instrument of the Tory Party. This is a quite normal procedure which has been undertaken by a great many Governments on a great many occasions.

I now pass to another aspect of the matter that was raised. It was suggested on Friday—I am glad to say that it was not suggested today—that the raising of the rates of interest to the Public Works Loan Board was, in some way or another, calculated to enrich bloated financial magnates. That suggestion does not bear a moment's analysis, because if hon. Members will contemplate the position they will appreciate that the rate of interest, whatever it is, is paid not to any private persons but is paid back to the Public Works Loan Commissioners, where it is available to be re-lent in subsequent loans, and its availability to be lent again in subsequent loans relieves the national Exchequer of the need to provide money that would otherwise have to be provided for these loans, and, therefore, the money in question goes to the general funds of the State, or, if the hon. and learned Gentleman the Member for Northampton (Mr. Paget) prefers it, to the relief of the taxpayers.

Mr. Jay

The hon. Gentleman knows, and he would not disagree, that this has to be taken with the rise in the Treasury Bill rate—which we cannot discuss today—and that it is all one policy. Therefore, of course, the increased interest rate goes to the banks and other private financial institutions.

Mr. Boyd-Carpenter

I would agree with the hon. Gentleman only to this extent, that we cannot discuss it at length, as I understand it, even if we can discuss it at all, for we are concerned, on the hon. Gentleman's own Amendment, not with any general question of interest rates: we are concerned with these specific rates, and, as I understand it. Mr. Hopkin Morris—and I speak subject to your correction—the only issue that is in order in this debate, or, indeed, with which this Committee is at present concerned, is the rate of interest to be paid by local authorities to the Public Works Loan Commissioners. I shall be very happy to have the opportunity of discussing these matters on the appropriate occasions with the hon. Gentleman the Member for Battersea, North (Mr. Jay), but I cannot do so now because it is outside this Measure and outside the proposal now before the Committee.

The matter amounts, if no further action is taken—and I stress that—to a readjustment of burden between one side of public funds and another, the local and national. It has been coupled, of course, with the Chancellor's intimation that the normal discussions with the local authorities on subsidy would be brought forward from June and would take place in the near future. Therefore, we start on the basis that this is an adjustment of burden which, if uncompensated for, would be an adjustment in favour of the taxpayer as against the ratepayer, but it is subject to compensatory action being taken in the comparatively near future.

It is not a question here of any question of private interest. I was glad to be reminded by the hon. Member for Brighouse and Spenborough (Mr. J. Edwards), who was previously associated with the Department with which I am connected, of the Exchequer's interest in this issue, and I can assure him that, as he did not forget that interest when he was at the Treasury, nor shall I. It is important for the Committee to appreciate that this is not a question of the allocating of private interests of individuals.

The question really is this. Why should local authority borrowing be at a lower cost than other forms of public borrowing? What is the case for doing that? I yield to no one in my admiration for the work, particularly on social services, that is done by the local authorities. But, they are not the only people who do socially valuable work. The central Government work, through for example, the regional hospital boards, or other public services, is equally important.

What hon. Gentlemen opposite seem to be arguing is that local authority borrowing should be singled out and given a special position at a lower interestrate than other public authority borrowing, and it does seem to me that no case has really been made out so far for doing this. It is an attempt at the argument of which the hon. Gentleman the Member for Battersea, North, is so fond—I have heard him use it three times, but I have no doubt that I shall have the good fortune, before the Sitting is concluded, of hearing it a fourth time—

Mr. Jay

Not today.

Mr. Boyd-Carpenter

I am very disappointed.

The argument is also adopted by the hon. Gentleman the Member for Widnes (Mr. MacColl), and it is the argument that, if we are financing these loans out of a Budget surplus, we need not charge the same rate of interest as if we had to borrow the money. I think that that is the argument fairly stated. The snags in this argument, I think, are these. First, it proves too much. It is an argument, if it is logical at all, for an interest-free loan. Second, it is quite impossible to identify a particular part of a Budget surplus as having gone in any particular direction—as having been allocated to a particular source in this case, the local authorities.

Surely the real test, the practical test, that must be applied is the consideration of the true value, and, therefore, the right price of the loan—not so much the cost to the lender, but what the money would have earned if lent elsewhere on similar security. [HON. MEMBERS: "No."] Surely that is the practical test: what is the real value of the loan—unless we accept the argument, which I shall be coming to in a moment, that the local authorities should have it at below the rate cost?

That there should be no discrimination in favour of local authorities as against all other public borrowers has been quite clearly the conclusion of hon. and right hon. Gentlemen in this Committee, culminating with Sir Stafford Cripps in the speech which I quoted on Friday. I think that what Sir Stafford Cripps said has such good sense and such cogency that the Committee will pardon me if I quote it again. He was asked a Question by Mr. Piratin, who was then a Member of the House of Commons but is no longer with us, and he answered: The present rates charged are 2 per cent. for loans of less than five years, 2½ per cent. for loans of five to 15 years and 3 per cent. for loans for 15 years and longer. The rates of interest charged to local authorities are fixed from time to time to correspond broadly with Government borrowing rates for comparable periods. Mr. Piratin put a supplementary question asking: Will the Chancellor of the Exchequer explain what new circumstances have arisen during the last few months, since the ex-Chancellor of the Exchequer introduced the very welcome reduction in interest charges, to make it necessary to inflict this further burden on local authorities? That is a phrase that seems a little familiar today. Sir Stafford Cripps replied: The Government borrowing rates for comparable periods have altered."—[OFFICIAL REPORT, 20th January, 1948; Vol. 446, c. 33.] That is precisely the reason for this change now, and as, as always, Sir Stafford Cripps expressed the thought he desired to express in language of such clarity and such force, I do not think we can do better than quote those words as expressing what it is that is being done now.

I think the hon. Member for Battersea, North, fell a little below his usual standard of fairness last Friday when he referred to this. He said: The hon. Gentleman"— he meant me— knows perfectly well that Sir Stafford Cripps maintained this rate of interest at 3 per cent., and my complaint is precisely that Sir Stafford Cripps's policy has been abandoned and the rate raised from 3 per cent. to 3¼ per cent."—[OFFICIAL REPORT, 23rd November, 1951; Vol. 494, c. 754.] The hon. Gentleman knows perfectly well from the words of Sir Stafford Cripps himself—and whatever one may think of Sir Stafford's views, he could make himself clear—that what he said was the reason for his action was, in his own words: The Government borrowing rates for comparable periods have altered. I thought that it was a little below the very high standard that one always expects of the hon. Member for Battersea, North, to say that his complaint was that we were abandoning the policy of Sir Stafford Cripps.

5.0 p.m.

Mr. Jay

If the hon. Gentleman thinks that it was the policy of Sir Stafford Cripps slavishly to follow the market rate of interest, how can he explain the fact that Sir Stafford Cripps notably refrained from doing so during most of 1948, the whole of 1949 and 1950?

Mr. Boyd-Carpenter

No one has said that we should slavishly follow it. Obviously, too frequent changes cause inconvenience to local authorities. Broadly, it is necessary, in our view, that these rates should be fairly close relationship to the market rate, though if the market should fluctuate we cannot expect to follow it every month. I hope that will relieve the hon. Gentleman's mind.

The reason which has caused my right hon. Friend to take the action we are discussing this afternoon is really the same reason which caused Sir Stafford Cripps to take the same action then—the fact that it was desirable to bring the rate more into line with the Government borrowing rate for the same period.

Mr. Paget rose—

Mr. Boyd-Carpenter

I am sorry I cannot give way. That is a point that hon. Members, when they become so eloquent as they undoubtedly have on the wrongs of the local authorities, should reflect upon—that what is being done is consistent with the policies of Government on different occasions over a great many years.

The discussion last Friday and to some extent this afternoon, notably in the speeches of the hon. Member for Islington, North (Mr. Fienburgh), and the hon. Member for Leeds, West (Mr. Pannell) related to the discussions which are shortly to take place between the Minister of Housing and Local Government and the local authorities. All sorts of assurances were asked for.

Mr. Paget

On a point of order. May I make the point that if on a Committee stage, contrary to all practice, the Government will not give way when they are asked to, surely they cannot complain if the proceedings are long, because it is found necessary, instead of disposing of a point at once to make a speech about it afterwards?

Mr. Boyd-Carpenter

I have given way on a considerable number of occasions, and one is entitled, I think, to indulge in a certain selectivity, otherwise it becomes quite impossible to develop a coherent argument. I think that the hon. and learned Gentleman's complaint was particularly inapposite to a Committee stage when it is always possible, when a point has been put in a subsequent speech, for a reply to be made to it.

I assure him that if I did not give way on a complex argument, I did not intend any discourtesy to him, nor in fact do I deny him any opportunity of putting his point of view. If, when one is endeavouring to reply to six or seven speeches from the other side of the Committee, one allows oneself to be distracted from the theme of one's argument every time an hon. Member seeks to interrupt, one will get nowhere.

As I was saying, these assurances were asked for. Hon. Members will appreciate, if they pause to consider, how impossible it is, before discussions have even begun, to give definite assurances as to one aspect of their results. It really is quite impossible to have an effective discussion on matters of considerable importance and some difficulty if one of the parties to the discussion is to be bound in advance by precise and specific pledges as to what is to happen.

Sensible negotiations have to proceed on a basis of give and take, and if one party binds himself in advance he creates the greatest difficulty for himself. The assurance that I can give is the assurance which the Chancellor of the Exchequer went out of his way to give on 7th November, when he referred not only to the fact that these discussions were being deliberately brought forward from June, when they would normally have taken place, but to the fact that the increase in the interest rates would be one factor in those discussions. I do not think that hon. Members who have taken part, as so many hon. Members have, in complicated discussions of this sort really believe that it is possible in advance of the discussions to give the specific assurances for which they have asked.

Mr. J. Edwards

Let us be clear about what the hon. Gentleman is saying. The local authorities want to know where they are. The hon. Gentleman said that it is most unreasonable to ask for an assurance at this stage. There is only one reason why His Majesty's Government should not wish to give an assurance, and obviously it is that they do not intend to go the whole way in the compensation of local authorities.

Mr. Boyd-Carpenter

The hon. Gentleman has himself taken part, not without distinction, in delicate negotiations. I said "not without distinction" I did not say with success. He knows perfectly well how impossible it is to conduct discussions if whole areas of the matters to be discussed have been decided in advance.

The hon. Gentleman says that the local authorities want to know where they are. Of course they do. The bringing forward of these discussions will help them to know where they are very much more quickly than would have been the case if the review had been left to take its normal course. It really is begging the question to say that local authorities who, in the near future, are about to enter into discussions with my right hon. Friend require to know where they are by way of assurances before those discussions begin.

I think that hon. Members, certainly those who have to deal with local authorities, will appreciate that they are pretty capable of putting their point of view and are not lacking in. forensic ability in the powers of persuasion on all those aspects of the matter which very naturally trouble hon. Members, because we all appreciate how important they are in the lives of our constituents and to the country. No one on either side of the House ignores that.

Surely, however, when these discussions are about to begin we must leave it for all matters concerned to be gone into in detail and sympathetically by those who represent the local authorities and my right hon. Friend. That surely is the proper position in which this House can, for the moment, leave the matter. [HON. MEMBERS: "No."] We are entitled to our opinion on this. If, at the end of these discussions, the results seem to some hon. Members to be unsatisfactory, I do not think that the resources of Parliamentary procedure need be unduly taxed in order to enable the matter to be raised with my right hon. Friend. Indeed, that surely is the proper way to deal with a matter which does not, of course, as the Committee is aware, arise directly from this Bill.

I think that we have all tended to forget in the last day or two that this Bill does not fix the rate of interest. It provides the money, and it also authorises the commitments which are the foundation of the whole loan activity of the Public Works Loans Board. That is what we are concerned to do by this Bill. Indeed, that is the matter of urgency, so far as this Committee is concerned. We are concerned, if the Committee thinks fit, to provide the money and to authorise the commitments.

I would ask that after the matter has received such discussion as seems to right hon. and hon. Gentlemen to be necessary and desirable, and after the interesting and important issue of the rate of interest has been thrashed out to hon. Members' satisfaction, hon. Members will recall at the end of it that the immediate task before us is to make available the money, and to authorise the commitments so that the important work of the local authorities shall continue without interruption.

Mr. Hugh Dalton (Bishop Auckland)

I think that hon. Members will agree that the speech to which we have just listened was profoundly unsatisfactory, and we shall certainly, without reservation, take the Amendment to a Division. The Financial Secretary to the Treasury has given no guarantee that this increase in the rate of interest will not fall predominantly, if not completely, on the local ratepayers or rentpayers, as the case may be. The only phrase that he quoted was a repetition of the phrase used by the Chancellor of the Exchequer when he said that in discussions with the local authorities the increase of the rate of interest will be one factor—as no doubt it will be—along with a number of others.

Another factor is the Government's desire gradually to raise the rates of interest. This is one example of the dearer money, deflationary policy advocated for so long by the "Economist," which has at last this Government's support. For six years, we rejected the advice of Mr. Crowther, but the Government has fallen into his clutches. That is not denied.

It is clear, as has been frequently stated, that the rents of the new council houses will rise by approximately 5s. a week—in some cases a little less, and in others a little more—as the result of raising the rate from 3 per cent. to 3¾ per cent. Many of my hon. Friends with practical knowledge of local government have expressed the view that this has had a most disturbing effect—the hon. Member for Sunderland, South (Mr. Ewart). said this in an excellent speech—on the local authorities at the present time and on their plans. I am only going to speak briefly because it is high time that we challenged the Government to a Division and found out how many of their supporters are still awake after last night.

I must, however, say something more about the practice of the Labour Government. I must say one more word on the subject of the policy pursued by Sir Stafford Cripps and by my right hon. Friend the Member for Leeds, South (Mr. Gaitskell), when they were Chancellors of the Exchequer in the late Government. It is perfectly true that Sir Stafford Cripps on one occasion, in January, 1948, put up the rate from 21 per cent. which was what the local authorities paid when I was the Chancellor of the Exchequer—and they were much happier with that rate, and many local authorities look back with great regret to that time, when they were enabled to keep down housing costs by that means—to, 3 per cent.

It must again be put on record that although Sir Stafford Cripps raised the rate in 1948, neither he nor his successor raised it again right up to the end of the period of office of the last Government. Their policy, as my hon. Friend the Member for Battersea, North, has explained, was governed—and I speak with a little knowledge about this as one of their colleagues in that Government—by the view that housing was a most important public undertaking, and that in that matter in particular it was not desirable or right to follow financial pedantry to the point of raising the rate of interest charged to local authorities, even when the rate of interest at which the Government borrowed from time to time had fluc4uated upwards.

It was by his action in those three years, followed by that of my right hon. Friend the Member for Leeds, South—a beneficent, sensible, wise action—that Sir Stafford Cripps encouraged local authorities to build houses at low cost and kept rents down. It is on their action over six years and not on the one occasion when the rate was put up only by one-half per cent. that the late Government will be judged.

5.15 p.m.

I shall ask my hon. Friends to divide, and to divide fairly quickly, because there is other business to come on. We shall divide on this issue in order to protect the public to the best of our power, to prevent the raising of the rents of council houses and to protect the local authorities from this unfortunate introduction of a new principle, so far as recent years are concerned, which cannot but act most adversely upon the finances of local authorities, upon the ratepayers, and on the interests of the tenants of these houses.

Mr. David Logan (Liverpool, Scotland Division)

I am very surprised to hear the Minister, who has newly taken office, make such a statement on finance as he made today. I support the proposal which has been put forward on the question of the rate of interest. We are told that the rate of interest may be negotiated, but we know that at a certain date it was ¾ per cent. and that an increase of per cent, is now likely. I should like the Minister of Housing and Local Government to bear with me for a moment. There will be no imputations such as those which the hon. Gentleman mentioned earlier in regard to his policy, because I am as anxious as anyone on the benches opposite to see an improvement in housing in the City of Liverpool.

I have been nearly 20 years on the Housing Committee in that city and it is a pleasure to find that during that period the City Council have been able to put up 76,000 houses. We have had 7,000 houses erected during the last five years. Our problem in Liverpool is the same as in the other blitzed cities. The old question of costs has disappeared and the fancy prices that now exist will militate against the prospects of the 40,000 people who are waiting for homes in the City of Liverpool, just as people are waiting for them in all the other industrial areas.

This problem does not affect only the Labour Party. I speak for the whole of the citizens of Liverpool, who will be very badly hit by any increased costs. The ordinary workers in the city cannot stand an additional 4s. or 5s. a week, nor the enhanced prices that have to be paid for the houses erected at exorbitant costs in the satellite towns. Unless we know what our liabilities will be, we will not be able to take up the allocation with which the right hon. Gentleman stated so liberally a fortnight ago that he will be prepared to make good the housing shortage.

We must get rid of the idea of trading and finance when it comes to the question of settling the poor or the middle classes in their homes. We are having degradation, misery and poverty, and we also have tuberculosis, simply and solely because we cannot house our people. Even if the money were free of interest, that would not be going beyond what ought to be done in regard to the housing of people whose homes have been blitzed. In Liverpool we have over 40,000 people on the waiting lists, and all the other surrounding districts are in practically the same position.

Even with an additional¾per cent., consider what an extra cost of 4s. or 4s. 6d. a week will mean in the smaller homes. I agree that economies must be effected, but not at the price of the poor. We have no right to effect economies which will prevent better homes being found. It is no use for any Minister, having criticised the Labour Government for not producing houses, merely saying that the Government will produce 300,000. I hope that they will do so; I wish them every success.

If there is to be a stranglehold on the various borrowing powers of local com munities, we shall never be able to get the houses built. With the present cost of materials, the shortage of labour, and the higher prices that have to be paid, the burden is too heavy. Even those engaged in administration in the City of Liverpool, who are doing the job well, will be handicapped to such an extent that they will be frustrated in their work. I hope that the Minister will take a more charitable and broader vision of the benefit of cheap money when loaned to local bodies. I hope that the negotiations of which we have heard will be successful, and that the lowering of money rates will be done as low as possible to enable us to house our people.

Mr. Paget

Whatever qualities the Financial Secretary may lack, effrontery certainly is not one of them. He excelled himself when he accused my hon. Friend the Member for Oldham, West (Mr. Hale) of spreading alarm and despondency. Surely the alarm and despondency was spread when we were told last week of the great and grave cuts—or was it great and grave economies, or great and grave savings? We still want to know what that statement meant. We have had many explanations. Why is not the Minister of State for Economic Affairs here to tell us? For a fleeting moment, like a nervous rabbit putting its head out of a burrow, he appeared on the corner of the Front Bench, but now he has bolted again.

When shall we see him? Why does he not come here? After what happened on Friday, the right hon. Gentleman is not treating the House with great respect. Of course, if we are to be told that the right hon. Member is absent only because he has gone away to resign, we shall both respect and sympathise with the explanation, which is a proper one, but if he intends to remain in his job, why is he not here?

I turn now to the arguments which the Financial Secretary described as "historic." He said how the interest rates had been changed from time to time. That was going into the days when the interest rates were not controlled by the Government. The great historical difference which has occurred is that interest rates today are really and substantially controlled by Government policy; and when the Government said that they are putting up these rates because interest rates have gone up, they are the people whose deliberate policy is putting up these interest rates. They say that we have to follow the interest rates. In fact, they have to follow them in the sense that they have to spin around chasing their own tails. It is the hon. Members opposite who are the people who have done this.

What is the general effect? Somebody the other day said, "This is a transfer between the ratepayer and the taxpayer." Substantially, that is what the Financial Secretary said. Somebody then said, "But the ratepayer, the rentpayer and the taxpayer are all the same people." Yes, they are the same people in the sense that a tiger and a cat are the same animal; they just happen to differ in their proportions, that is all.

Rent and rates form a larger proportion of the spending of the poor. Taxation forms a larger proportion of the spending of the rich, and to transfer a liability, as is being done, from the taxpayer to the rentpayer and to the ratepayer, is simply to transfer spending power from the poor to the rich. That is the basis of this whole proposal. It is a policy to transfer spending power from the poor, who, on the whole, support this party, to the rich, who, on the whole, support the party opposite. That is the reality of this policy, and that is what is being done.

It is said that this is deflationary. Merely to transfer money from the poor to the rich, however, is not in the least deflationary.

Viscount Hinchingbrooke (Dorset, South)

Several times the hon. and learned Member said, "Transferring from the poor to the rich," and is not making himself clear. What collection of rich people has he in mind? Is he talking about the Chairmen of the Big Five banks in person? Are they to receive this interest? Who are the rich about whom he is talking?

Mr. Paget

I am talking of those to whom taxation is a more important item in their spending than rents and rates; that is, on the whole, the rich section of the community. [Interruption.] The noble Lord says that it has nothing to do with taxation, but the Financial Secretary explained that this was a transfer of liability from the taxpayer to the ratepayer and that that is what is being done.

That process is not deflationary in the least. It only becomes deflationary if the money which is transferred from the ratepayer and rentpayer to the Exchequer is retained in the Budget surplus. That would simply mean that this is a tax. If it is deflationary at all, it is a tax levied on the council tenants, upon the ratepayers; a tax so unjust that the Government would never dare put it in their Budget and are, therefore, introducing this taxation by a back door and a financial juggle. That is what we are getting.

Again, it is said—and these are turnings and twistings to escape from the brutal fact that this is simply a removal of purchasing power from the poor to the rich—that this will make houses cheaper. It can only do that if it reduces the pressure of the demand for houses that is to say, if it results in a demand for less houses. Even then, it will only make houses cheaper if it results in such a reduction in the demand for houses that we pass the marginal point and there are fewer houses wanted than the building industry is capable of building. Only when we get that degree of reduction can it possibly affect the price of houses.

At the time, and the one time, when some encouragement is said to be given to those who want to build houses for themselves, we have this question of the rate of interest, and what people can do in this direction is being raised against them. Now that there is controlled interest, it is quite unnecessary to do this. It is not a financial question, sound or unsound. This is an instance of social legislation, of social policy, of penalising the poor for the advantage of the rich, and that is why we are objecting to this Measure.

Captain Christopher Soames (Bedford)

Would not the hon. and learned Member agree that a man earning, say, £7 or £8 a week, living in a council house and paying, for example, 18s. a week rent, if he smokes and drinks and has an odd pint of beer, is paying more in taxes than he is in rent for his house, and that it is not, therefore, true to say that it is those people who are paying more in rents than taxes?

Mr. Paget

If the effect of this proposal is to put 4s. or 5s. on to a man's rent, he will not save that 4s. or 5s. by any reduction in taxation. It is a question of the proportion. This is a thing which will favour those whose income mostly goes in taxation, and that is a very large number of people, as against those for whom rent and rates represent a large proportion of their income.

5.30 p.m.

Mr. Geoffrey Hutchinson (Ilford, North)

The hon. and learned Member for Northampton (Mr. Paget) is always very dramatic when he addresses us, but I did not notice that his observations about the control of interest rates were received with any marked signs of assent by the right hon. Member for Leeds, South (Mr. Gaitskell), who was sitting just in front of him, or by the hon. Member for Battersea, North (Mr. Jay).

The real difficulty about the hon. and learned Gentleman's speech is the difficulty which attaches to all the speeches to which we have listened this afternoon from the opposite benches. The difficulty is that they have all been premature. Hon. Gentlemen have discussed at great length what is going to happen when this change is made in rates of interest to local authorities, upon the assumption that the negotiations which we are told are to commence in a very short time will not take place at all. Most of the arguments addressed to the Committee from the other side would be more in place when the results of the negotiations are known to us. Until those negotiations have taken place there may or may not be force in the arguments which hon. and right hon. Gentlemen opposite have addressed to the Committee.

Those observations apply to the right hon. Member for Bishop Auckland (Mr. Dalton). But he was also concerned, as I understood his speech, with another and different aspect of this question. He claimed that the late Government had rejected the advice which was given by Mr. Crowther. But did they? Did Sir Stafford Cripps reject that advice when he raised the rate of interest on these very loans for the purpose of bringing it more nearly into line with the rate of interest at which the Government were able to borrow?

The right hon. Gentleman went on to claim that local authorities were very pleased with his administration. But I must remind him that in 1947 there was almost a clean sweep of the members of his party at the local elections which took place in November of that year. I would not regard that as very striking evidence that the electors, at any rate, including a great many council tenants, were satisfied with the proceedings of the right hon. Gentleman, as he seems to consider that they ought to have been.

It is true, as the Financial Secretary to the Treasury says, that what the Government propose to do in regard to these interest rates is really identical with what was done by Sir Stafford Cripps in 1948. The hon. Member for Battersea, North, challenged that in the debate last Friday. He said that in the years which followed the change of interest the funds which are loaned to the local authorities were in fact not borrowed at all. It may well be that that was the reason why the rate of interest which Sir Stafford Cripps had fixed in 1948 remained unchanged between 1948 and 1950. These considerations really dispose of the main arguments which have been addressed to the Committee this afternoon.

I turn now from that aspect of the matter to consider for a few moments one or two of the other consequences which hon. Gentlemen opposite have said are likely to follow from this change. Last Friday many Members on the other side of the Chamber drew attention to the effect of these proposals upon the school building programme. We have not heard so much this afternoon about the effect on the building programmes of the education authorities. I expect that in the meantime hon. Members have been asking themselves how much of the additional cost in respect of new school buildings will actually fall on the local authorities. At present, the overall proportion of rate-borne and tax-borne expenditure on education is, roughly, 60 per cent. to the taxes and 40 per cent. to the rates.

If that is the case, the additional loan charge which will fall upon local authorities will be met to the extent of 60 per cent. by an increase in the grant, and the additional burden which will fall upon the education authorities will not be such a very serious handicap to their building programmes as some hon. Members on the other side would have had us believe.

The effect upon the cost of water supplies was referred to by the hon. Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop). That is a very important matter. I am very glad that he referred to it. I want to remind him that very nearly half the water supplies in this country are provided by statutory companies who do not enjoy the advantage of borrowing from the Public Works Loan Commissioners. Their capital requirements must be met from the market in the ordinary way. So far as those areas which are served by companies are concerned—

Lieut.-Colonel Marcus Lipton (Brixton)

The hon. and learned Gentleman has referred to water undertakings in relation to the Public Works Loan Board. If he would refer to the last report of the Board he will see that about £10 million in the way of loans has been granted to water services.

Mr. Hutchinson

That may be perfectly true. I am going to deal with the water authorities who do have the advantage of borrowing from the Public Works Loan Commissioners at these very favourable rates. At the moment, I was pointing out that about 40 per cent. of the water supplied in this country comes not from local authorities at all but from statutory companies who do not enjoy the special advantage of borrowing from the Commissioners. These companies have to meet their capital requirements by borrowing in the market in the ordinary way. The proposals which the Government make to increase interest rates will have no effect at all upon them or upon their consumers.

I come now to the local authority undertakings. It is true that the cost of their capital requirements will be increased to some extent, but it does not necessarily follow that that increase will be passed on to their consumers in the form of increased charges. Many water undertakings have been very successful in absorbing increased loan charges on capital programmes without having recourse to an increased call upon their consumers.

Mr. Barnett Janner (Leicester, North-West)

If they were doing so well out of the enterprise, why did they not reduce their charges?

Mr. Hutchinson

The hon. Member has only a limited knowledge of how water undertakings are managed. I suggest that he secures election to a local authority and becomes a member of the water committee. He will then find out how these things are done.

I was going on to say, before I was interrupted, that the hon. Member for Newcastle-upon-Tyne, East, was discussing this matter without referring at all to the Rural Water Supplies and Sewerage Act, 1944. He knows as well as I do that that Act is intended to assist rural authorities to extend their mains into those parts of their areas which have no main water supply and, if necessary, to provide those areas with the necessary sewerage, which must go hand in hand with water supplies.

The hon. Gentleman took great satisfaction in inviting the last Parliament to authorise very large sums under that Act to these rural schemes. The purpose of the Act is to enable a water supply to be brought within the means of the population in rural areas. It is no good saying that the increased cost in respect of capital charges may fall upon water undertakings in rural areas, without at the same time remembering that the charges may be relieved by the operation of a scheme under the Rural Water Supplies Act, 1944.

Mr. Blenkinsop

Are we to understand that the hon. and learned Gentleman supports increased subsidies to such water authorities as are likely to suffer under the scheme?

Mr. Hutchinson

The hon. Gentleman knows that it is not done in that simple way. The purpose of the scheme is to bring water within the means of the persons who are to benefit by it. It has been very effective for that purpose. The hon. Gentleman knows perfectly well how it is done, and so do I, and I really cannot occupy the time of the Committee by explaining it.

The main burden of the speeches to which we have listened has been directed, no doubt quite rightly, to housing questions. Let us wait and see the result of these negotiations—[HON. MEMBERS: "Oh!"]—before we conjure up too dreary and depressing a picture of what the result is likely to be.

Mr. Pannell

I should like to ask the hon. and learned Gentleman a question. He is one of the vice-presidents, I believe, of the Association of Municipal Corporations, and he will therefore know of the negotiations which took place prior to the passing of the Act of 1945 of the Coalition Government, by which local authorities got all their money, subject to certain reservations, from the Public Works Loan Board. Will he not say that there was a strict understanding by the local authorities in all those negotiations that if they were compelled to go to the Board they would get money more cheaply than at the current interest rates?

Mr. Hutchinson

So far as I remember I was not vice-president of the Association of Municipal Corporations at that time. I have certainly no recollection that what the hon. Member suggests was ever one of the terms of the negotiations.

Mr. Pannell

Everybody else has.

5.45 p.m.

Mr. Roy Jenkins (Birmingham, Stechford)

I feel that the hon. and learned Member for Ilford, North (Mr. G. Hutchinson), is such an expert on these subjects that he finds it difficult to bring himself down to the level of the Committee. Certainly, I found it rather difficult to follow his point and I prefer to go back to the speech of the Financial Secretary.

The Financial Secretary, speaking on this subject in the debate on Second Reading, addressed to us some long and complicated arguments and did not really clear up any of the doubts we had about this increase in the interest rate. The trouble is that the attitude of the Government to an increase in the rate is hopelessly disingenuous. They cannot make up their minds whether to put this proposal forward as a disinflationary measure or whether to argue all the time that it is merely an adjustment and, in the words of the Financial Secretary, that they are merely transferring money from one public fund to another.

The Financial Secretary was at considerable pains to argue the point that it is merely a transfer. If this is so, I cannot understand how his approach to this Measure ties up with the approach of the Minister of State for Economic Affairs who, on Friday, devoted the greater part of his speech to show how this Measure would be disinflationary and how it would help the general disinflationary policy of the Government.

In view of what happened on Friday I must stress the point made by many of my hon. Friends and say it is most surprising that this afternoon the Minister of State for Economic Affairs has only visited us for about five minutes. After all, he was the central feature of that debate on Friday. He made an important speech to the Committee, and having made it with characteristic lucidity he had to intervene 18 times to explain what he had said. The whole debate was occupied with his speech, Ls interventions and replies from this side of the Chamber to interventions by him.

I think he ought to have come here and listened at least to the debate today if not have given us further assistance in deciding what this Measure involves. I hope the Chancellor of the Exchequer on his return from Rome has not compensated himself for not being able to control Lord Cherwell by insisting that the Minister of State for Economic Affairs shall not take part in this debate today.

I return to the point the Financial Secretary made in his speech. He argued, following on a point put very well by my hon. Friend the Member for Widnes (Mr. MacColl), that the Government argument was that these local authorities should pay what my hon. Friend called the "opportunity cost." The Financial Secretary did not use that term himself but he put forward an argument which amounted to that. The rate which the local authority should pay for the loan was the rate the Government could get for lending the money to people who could offer an equally good security anywhere else in the country. If that is the argument it is one which proves too much. If that is so there really does not seem to be any point at all in fixing a rate of interest at which these loans are to be advanced. It would be much better to allow the local authorities to go to the market and pay what the market wants.

When he rests his case so firmly on the fact that these local authority loans must follow the rate of interest the Government have to pay, changing from time to time, the Financial Secretary opens up very dangerous prospects for himself. After all the 3¾ per cent., if that is to be the rate, is already out of date. Longterm interest for Government loans is above 4 per cent. at the present time. Government credit has been going very badly since the present Administration came into power. Gilt-edged has slipped very often. It is already above 4 per cent., and indications are that it may go further.

What we are seeking is not merely to save the local authorities this three-quarters of 1 per cent. but to protect them against a further increase which, on the case put forward by the Financial Secretary, seems certain in the comparatively near future. We regard that as a very serious prospect. The only argument the Financial Secretary put to the Committee in favour of the course of action the Government are taking is that in the last 50 years or so, under all sorts of Governments, there have been big fluctuations in the rate of interest charged.

I do not think that is a good enough argument. I think my hon. and learned Friend the Member for Northampton (Mr. Paget) put his finger on the weakness of that argument. He said that in these days we seemed to have a great deal more control over the market than we had in those days. The Financial Secretary could equally tell us that in the last 50 years unemployment had fluctuated between three million and 250,000. But the argument would not be used at the present time that it was all right if unemployment went up to one million because it had gone up in the past under previous Tory Governments. In these matters I think we feel that we are getting a little closer towards more control, that we can

go further towards a greater degree of control and do not want to go back to the old position.

This proposal is a very serious matter. Clearly, it will put up the rates on local authority houses and in that sense it will be the second prong of a two-prong attack the first of which was announced by the Minister of Housing and Local Government yesterday—to make need a less important factor in determining who gets a house. It is intended to allow many more houses to be built for sale. It is quite obvious that even if we are to have some need criterion there it will not be a sharper one than that applied to houses built for letting.

This will also mean that even as far as the smaller proportion of houses available for letting is concerned more and more people will find that their need is not sufficient to get them a house because even if their need brings them to the top of the housing list the additional money required to pay the rent may be too much for them to be able to afford. I think that this is a very serious matter and I hope that we shall press the Amendment to a Division and carry it.

The Parliamentary Secretary to the Treasury (Mr. P. G. T. Buchan-Hepburn) rose in his place, and claimed to move, "That the Question be now put."

Question put, "That the Question be now put."

The Committee divided: Ayes, 223 Noes, 181.

Division No. 20.] AYES [5.55 p.m.
Aitken, W. T. Brooman-White, R. C. Davies, Rt. Hn. Clement (Montgomery)
Allan, R. A. (Paddington, S.) Browne, Jack (Govan) Deedes, W. F.
Alport, C. J. M. Buchan-Hepburn, Rt Hon. P. G. T. Digby, S. Wingfield
Anstruther-Gray, Major W. J. Bullard, D. G. Dodds-Parker, A. D.
Arbuthnot, John Bullock, Capt. M. Donaldson, Comdr. C. E. McA.
Assheton, Rt. Hon. R. (Blackburn, W.) Butcher, H. W. Donner, P. W.
Astor, Hon. J. J. (Plymouth, Sutton) Butler, Rt. Hon. R. A. (Saffron Walden) Doughty, C. J. A.
Baker, P. A. D. Cary, Sir R. Douglas-Hamilton, Lord Malcolm
Baldwin, A. E. Channon, H. Drayson, G. B.
Banks, Col. C. Churchill, Rt. Hon. W. S. Dugdale, Maj. Rt. Hn. Sir T. (Richmond)
Barber, A. P. L. Clarke, Col. Ralph (East Grinstead) Duncan, Capt. J. A. L.
Baxter, A. B. Clarke, Brig. Terence (Portsmouth, W.) Elliot, Rt. Hon, W. E.
Bell, Philip (Bolton, E.) Clyde, Rt. Hon. J. L. Fell, A.
Bell, R. M. (Bucks, S.) Cole, N. J. Finlay, G. B.
Bennett, F. M. (Reading, N.) Colegate, W. A. Fisher, Nigel
Bennett, Sir Peter (Edgbaston) Conant, Maj. R. J, E. Fletcher, Walter (Bury)
Bennett, Or. Reginald (Gosport) Cooper-Key, E. M. Galbraith, Cmdr. T. D. (Pollok)
Bevins, J. R. (Toxteth) Craddock, Beresford (Spelthorne) Galbraith, T. G. D. (Hillhead)
Bishop, F. P. Cranborne, Viscount George, Rt. Hon. Maj. G. Lloyd
Black, C. W. Crookshank, Capt. At. Hon. H. F. C. Glyn, Sir Ralph
Boyd-Carpenter, J. A. Crouch, R. F. Godber, J. B.
Boyle, Sir Edward Crowder, John E. (Finchley) Gough, C. F. H.
Braine, B. R. Cuthbert, W. N. Gower, H. R.
Braithwaite, Sir Albert (Harrow, W.) Darling, Sir William (Edinburgh, S.) Graham, Sir Fergus
Brooke, Henry (Hempstead) Davidson, Viscountess Gridley, Sir Arnold
Grimston, Robert (Westbury) Macdonald, Sir Peter (I. of Wight) Schofield, S. (Barnsley)
Harris, Frederic (Croydon, N.) Mackeson, Brig. H. R. Schofield, Lt.-Col W. (Rochdale)
Harrison, Lt.-Col. J. H. (Eye) McKibbin, A. J. Scott, R. Donald
Harvey, Air Core. A. V. (Macclesfield) McKie, J. H. (Galloway) Scott-Miller Cmdr. R.
Hay, John MacLeod, Iain (Enfield, W.) Shepherd, William
Head, Rt. Hon. A. H. MacLeod, John (Ross and Cromarty) Simon, J. E. S. (Middlesbrough, W.)
Head, Sir Lionel Macmillan, Rt. Hon. Harold (Bromley) Smiles, Lt.-Col. Sir Walter
Heath, Edward Macpherson, Maj. Niall (Dumfries) Smithers, Peter (Winchester)
Hicks-Beach, Maj. W. W. Maitland, Patrick (Lanark) Smithers, Sir Waldron (Orpington)
Higgs, J. M. C. Manningham-Buller, Sir R. E. Snadden, W. McN.
Hill, Dr. Charles (Luton) Markham, Major S. F. Soames, Capt. C.
Hill, Mrs. E. (Wythenshawe) Marlowe, A. A. H. Spearman, A. C. M.
Hinchingbrooke, Viscount Marples, A. E. Speir, R. M.
Hirst, Geoffrey Maydon, Lt.-Cmdr S L. C. Spens, Sir Patrick (Kensington, S.)
Holland-Martin, C. J. Mellor, Sir John Stanley, Capt. Hon. Richard
Holt, A. F. Monckton, Rt. Hon. Sir Waller Stevens, G. P.
Hopkinson, Henry Moore, Lt.-Col. Sir Thomas Steward, W. A. (Woolwich, W)
Hornsby-Smith, Miss M. P. Morrison, John (Salisbury) Stewart, Henderson (Fife, E.)
Horobin, I. M. Nabarro, G. D. N. Stoddart-Scott, Col M.
Howard, Greville (St. Ives) Nield, Basil (Chester) Storey, S.
Hudson, Sir Austin (Lewisham, N.) Noble, Cmdr. A. H. P. Studholme, H. G.
Hudson, W. R. A. (Hull, N.) Nugent, G. R. H. Summers, G. S.
Hulbert, Wing Comdr. N. J. Nutting, Anthony Sutcliffe, H.
Hurd, A. R. Oakshott, H. D. Taylor, William (Bradford, N.)
Hutchinson, Geoffrey (Ilford, N.) Odey, G. W. Thomas, Rt. Hon. J. P. L. (Hereford)
Hutchison, Lt.-Com. Clark (E'b'rgh W.) Ormsby-Gore, Hon. W. D. Thompson, Kenneth Pugh (Walton)
Hutchison, James (Scotstoun) Orr, Capt. L. P. S. Thompson, Lt.-Cdr. R. (Croydon, W.)
Hyde, Lt.-Col. H. M. Orr-Ewing, Charles Ian (Hendon, N.) Thornton-Kemsley Col. C. N.
Hylton-Foster, H. B. H. Orr-Ewing, Ian L. (Weston-super-Mare) Tilney, John
Jenkins, R. C. D. (Dulwich) Partridge, E. Touche, G. C.
Jennings, R. Peake, Rt. Hon. O. Turner, H. F. L.
Johnson, Eric (Blackley) Perkins, W. R. D. Turton, R. H.
Jones, A. (Hall Green) Peto, Brig. C. H. M. Vane, W. M. F.
Joynson-Hicks, Hon. L. W. Peyton, J. W. W. Vaughan-Morgan, J. K.
Kaberry, D. Pickthorn, K. W. M. Wakefield, Edward (Derbyshire, W.)
Kerr, H. W. (Cambridge) Pilkington, Capt. R. A. Walker-Smith, D. C.
Lambert, Hon. G. Powell, J. Enoch Ward, Hon. George (Worcester)
Lambton, Viscount Price, Henry (Lewisham, W.) Ward, Miss I (Tynemouth)
Leather, E. H. C. Prior-Palmer, Brig O. L. Waterhouse, Capt. Rt. Hon. C.
Legge-Bourke, Maj. E. A. H. Raikes, H. V. Wellwood, W.
Legh, P. R. (Petersfield) Rayner, Brig. R. White, Baker (Canterbury)
Lindsay, Martin Redmayne, M. Williams, Charles (Torquay)
Linstead, H. N. Renton, D. L. M. Williams, Gerald (Tonbridge)
Llewellyn, D. T. Roberts, Maj. Peter (Heeley) Williams, R. Dudley (Exeter)
Lloyd, Maj. Guy (Renfrew, E.) Robinson, Roland (Blackpool, S.) Wills, G.
Lockwood, Lt.-Col. J. C. Roper, Sir Harold Wilson, Geoffrey (Truro)
Longden, Gilbert (Herts, S.W.) Ropner, Col. L. Wood, Hon. R.
Lucas, Sir Jocelyn (Portsmouth, S.) Russell, R. S. York, C.
Lucas-Tooth, Sir Hugh Ryder, Capt. R. E. D.
McCallum, Major D. Salter, Rt. Hon. Sir Arthur TELLERS FOR THE AYES:
Mr. Drewe and Mr. Vosper.
Acland, Sir Richard Craddock, George (Bradford, S.) Grey, C. F.
Albu, A. H. Crossman, R. H. S. Griffiths, David (Rother Valley)
Anderson, Alexander (Motherwell) Cullen, Mrs. A. Hale, Leslie (Oldham, W.)
Anderson, Frank (Whitehaven) Dalton, Rt. Hon. H. Hall, John (Gateshead, W.)
Awbery, S. S. Davies, A. Edward (Stoke, N.) Hamilton, W. W.
Bacon, Miss Alice Davies, Harold (Leek) Hargreaves, A.
Balfour, A. Davies, Stephen (Merthyr) Hastings, S.
Bartley, P. Deer, G. Hayman, F. H.
Bence, C. R. Dodds, N. N. Herbison, Miss M.
Benson, G. Ede, Rt. Hon. J. C. Hobson, C. R.
Beswick, F. Edwards, John (Brighouse) Holman, P.
Bevan, Rt. Hon. A. (Ebbw Vale) Edwards, Rt. Hon. Ness (Caerphilly) Houghton, Douglas
Bing, G. H. C. Edwards, W. J. (Stepney) Hubbard, T. F.
Blackburn, F. Evans, Albert (Islington, S.W.) Hudson, James (Ealing, N.)
Blenkinsop, A. Evans, Edward (Lowestoft) Hughes, Cledwyn (Anglesey)
Blyton, W. R. Evans, Stanley (Wednesbury) Hughes, Emrys (S. Ayrshire)
Boardman, H. Ewart, R. Hughes, Hector (Aberdeen, N.)
Bowden, H. W. Fernyhough, E. Irvine, A. J. (Edge Hill)
Brockway, A. F. Finch, H. J. Isaacs, Rt. Hon. G. A.
Brook, Dryden (Halifax) Fletcher, Eric (Islington E.) Janner, B.
Broughton, Or. A. O. D. Follick, M. Jay, D. P. T.
Brown, Thomas (Ince) Foot, M. M. Jeger, Dr Santo (St. Pancras, S.)
Butler, Herbert (Hackney, S.) Forman, J. C. Johnson, James (Rugby)
Carmichael, J. Fraser, Thomas (Hamilton) Jones, David (Hartlepool)
Castle, Mrs. B. A. Freeman, Peter (Newport) Jones, T. W. (Merioneth)
Champion, A. J. Gaitskell, Rt. Hon. H. T. N. Key, Rt. Hon. C. W.
Clunie, J. Gibson, C. W. King, Dr. H. M.
Cocks, F. S. Glanville, James, Kinley, J.
Coldrick, W. Greenwood, Anthony (Rossendale) Lee, Miss Jennie (Cannock)
Cove, W. G. Greenwood, Rt. Hon. Arthur (Wakefield) Lindgren, G. S.
Lipton, Lt.-Gol. M. Oswald, T. Sparks, J. A.
Logan, D. G. Padley, W. E. Stewart, Michael (Fulham, E.)
Longden, Fred (Small Heath) Paget, R. T. Strauss, Rt. Hon. George (Vauxhall)
MacColl, J. E. Paling, Rt. Hon. W. (Dearne Valley) Stross, Dr. Barnett
McGhee, H. G. Pannell, Charles Summerskill, Rt Hon. Edith
McGovern, J. Pargiter, G. A. Swingler, S. T.
McInnes, J. Paton, J, Taylor, John (West Lothian)
MacMillan, M. K. (Western Isles) Pearson, A. Thomas, David (Aberdare)
McNeil, Rt. Hon. H. Popplewell, E. Thomas, Iorwerth (Rhondda, W.)
MacPherson, Malcolm (Stirling) Porter, G. Timmons, J.
Mainwaring, W. H. Price, Joseph T (Westhoughton) Tomney, F.
Mann, Mrs. Jean Price, Philips (Gloucester, W.) Turner-Samuels, M.
Manuel, A. C. Proctor, W. T. Ungoed-Thomas, Sir Lynn
Marquand, Rt. Hon. H. A. Pryde, D. J. Viant, S. P.
Mikardo, Ian Pursey, Cmdr. H. Wallace, H. W.
Mitchison, G. R. Rankin, John Watkins, T. E.
Monslow, W. Reeves, J. Weitzman, D.
Moody, A. S. Reid, William (Camlachie) West, D. G.
Morgan, Dr. H. B. W. Robens, Rt. Hon. A. White, Henry (Derbyshire, N.E.)
Morley, R. Roberts, Albert (Normanton) Whiteley, Rt. Hon. W.
Morris, Percy (Swansea, W.) Robinson, Kenneth (St. Pancras, N.) Williams, David (Neath)
Morrison, Rt. Hon. H. (Lewisham, S.) Rogers, George (Kensington, N.) Williams, Rt. Hon. Thomas (Don V'll'y)
Mort, D. L. Schofield, S. (Barnsley) Williams, W. R. (Droylsden)
Moyle, A. Shinwell, Rt. Hon. E. Williams, W. T. (Hammersmith, S.)
Mulley, F. W. Short, E. W. Winterbottom, Ian (Nottingham, C.)
Murray, J. D. Shurmer, P. L. E. Winterbottom, Richard (Brightside)
Neal, Harold (Bolsover) Simmons, C. J. (Brierley Hill) Woodburn, Rt. Hon. A.
Noel-Baker, Rt. Hon. P. J. Slater, J. Yates, V. F.
Oldfield, W. H. Smith, Ellis (Stoke, S.) Younger, Rt. Hon. K.
Oliver, G. H. Snow, J. W.
Orbach, M. Soskice, Rt. Hon. Sir Frank TELLERS FOR THE NOES:
Mr. Wilkins and Mr. Holmes.

Question put accordingly, "That those words be there inserted."

The Committee divided: Ayes, 181; Noes, 221.

Motion made, and Question proposed, "That the Clause stand part of the Bill."

The Deputy-Chairman (Mr. Hopkin Morris)

Mr. Jay.

Mr. E. Fletcher

On a point of order. Am I to understand, Mr. Hopkin Morris, that you do not intend to call the Amendment standing in my name, in page 1, line 13?

The Deputy-Chairman

Yes, that is so. It is beyond the scope of the Bill and is, therefore, out of order.

6.15 p.m.

Mr. Jay

I want to ask the Financial Secretary a few questions about the figure of £500 million which appears in Clause 1 (1). I apologise for pursuing the Financial Secretary further if he has had rather a less good night's sleep than he would wish, but I am afraid that there are one or two questions that I must ask.

In his speech on Friday the hon. Gentleman explained that this figure of £500 million is the figure of the loans which the Bill authorises local authorities to make. He added that the annual rate of advances actually made this year was a little more than £350 million. He then told us that in the present year that rate will not be substantially greater. That did not surprise me at all. But I want to direct the attention of the Committee to this: it is the rate of actual advances made, as opposed to the total authorised, which measures fairly nearly the actual amount of work done by local authorities.

It therefore follows from the Financial Secretary's statement that the Government must have already decided that they do not intend to build appreciably more than 200,000 houses this year. If anyone in the Committee doubts that, I ask him to look at the figure in this Clause and the figures given by the Financial Secretary.

It is, of course, true, as we learned yesterday, that this year more houses are to be built for sale both by local autho rities, apparently, and private builders. [HON. MEMBERS: "Hear, hear."] Hon. Members may not yet have examined the figures very closely.

Some of the local authority houses built for sale, and many of the private houses, will be financed through public works loans. There can only be a large gap, I ask the Committee to notice, between the total of advances made during the year under this Clause, and the total building of new houses during the year, if a large proportion of those new houses are bought by persons with private capital of their own, or advanced through some form of private borrowing.

The Chairman

On the Motion that the Clause stand part, we are limited to what is in the Clause and cannot deal with how the money should be spent.

Mr. Jay

Yes, Sir Charles, but I am dealing with the figure of £500 million and the explanation the hon. Gentleman gave us about the figure. I think that, if I may continue a little further, you will agree that it is in order for the Committee, since it is asked to agree to this figure, to understand the implications of it and how it is made up.

If the hon. Gentleman is telling us that a high proportion of the houses to be bought will, in fact, be financed in some private way—not through these loans—he has openly admitted that the Government have largely abandoned altogether the principle of allocation according to need. I am not suggesting that that is so. Despite the statement of the Minister yesterday, and on the evidence of the figure in the Clause, I do not—not yet anyway—think so hardly of the Government as to suppose that they have gone as far as that.

But, in that case, it follows that the total of advances made under this Clause—and comprised within this figure of £500 million—remains a fairly good measure of the total of new houses to be built this year. The Financial Secretary on Friday, commenting on this figure, corrected my hon. Friend the Member for Oldham, West (Mr. Hale), on this point; and he made it clear that we must distinguish in looking at it between what he called immediate borrowings and commitments. That is why I am now following his guidance and examining the figure of immediate borrowings or advances.

The Financial Secretary explained to us, in showing how the figure of £500 million was made up, that of the total of £336 million advanced so far this year—that is an annual rate of £350 million—some £241 million is on account of housing and the remaining £95 million is for other purposes. That is not in dispute. In effect, two-thirds of the advances are made for housing purposes. It therefore follows, from the Financial Secretary's own figure, that the Government cannot be intending even now to build many more than 200,000 houses this year, unless they are to make catastrophic cuts in school building and other types of local authority work.

Supposing, on the figures the hon. Gentleman gave us on Friday, that the Government's real intention were to increase house building this year by only 10 per cent., that is to say to barely 220,000, they would then have to increase the figure for total advances during the year by something like £24 million and that, since the total is not to be materially higher, would have to come out of the £95 million available for schools and other purposes. Therefore, according to the Government's own figures, given us in connection with this Clause, unless the Government are proposing to cut schools and other local authority building work by something like 30 per cent., it is quite clear that they cannot be planning to build this year even as many as 220,000 houses. That seems to me to be the arithmetic which follows from the figures the hon. Gentleman has given.

I do not believe that even this Government can contemplate a sudden 30 per cent. cut in school building and all other local authority work. It would surely hardly be practicable even if they were to propose it. Therefore, I have no doubt, on the figures in this Clause, that the Government have no intention—and they know it—of even trying to build appreciably more than 200,000 houses this year. If that is not so, perhaps the hon. Gentleman, or his colleague from the Ministry of Housing and Local Government, will tell us, here and now, how many houses the Government do intend to build this year?

I think the Financial Secretary and his colleagues by now must know enough about the Government machine to realise how this figure of £500 million in the Clause has been made up. He must know that there exists by now in his Department, and in other Departments, a figure representing the number of houses which the Government propose to get built in 1952, and that the figure of commitments and advances in this Bill, and given in connection with this Clause on Friday, must have been based on that definite figure.

I therefore reach this conclusion—the hon. Gentleman can tell us where the mistake is, if there is any mistake—that unless and until he or one of his colleagues gives us the figure of the actual number of houses they are planning to build this year, we can only conclude on their own figure that the Government have already decided to build hardly, if any, more houses than 200,000 this year; secondly, that the figure of 300,000 houses was merely dangled before the electorate as a piece of deception; and that the Government are too cowardly to admit the actual figure which they are planning to build this year.

Mr. Boyd-Carpenter

I think I can answer the point the hon. Gentleman has made without detaining the Committee for very long. I think I can do so by pointing out the fallacy in his arithmetic. I am sure the hon. Gentleman is aware that the building programme is a continuous process and that the financial side of it is determined, not only by the advances, but by the advances plus the commitments which the Board enters into." The hon. Gentleman quoted, with complete accuracy, but without complete comprehensiveness, the figures in the Bill. He quoted one of them, £500 million and my reference to it. He did not, however, invite the attention of the Committee to the fact that, whereas under the Bill he introduced last year, the total permitted for advances plus commitments was £850 million, under this Bill the figure is £950 million. I hope that that will put his mind at rest.

Mr. Jay

Surely the hon. Gentleman can see that that is totally irrelevant. I mentioned that figure on Friday, and I was perfectly well aware of it. But the figure which measures the actual number of houses built during the year is the figure of the advances made; and, on the basis of that, I put forward my argument. Therefore, the answer he has given is no answer at all.

Mr. Boyd-Carpenter

The hon. Gentleman does not seem to understand the process. Perhaps I may put it again, and he will forgive me if I take a little longer this time. What the Board does is this. It is authorised to enter into commitments, which are necessary because various approvals have to be obtained before the actual advances are made. It enters into commitments on which the local authorities make their plans.

Therefore, the financial basis—and that is all I am strictly concerned with in this matter—upon which any building programme is started is not simply a figure taken by itself—the figure of advances—it is the figure of advances, plus commitments. I do not want to weary the Committee by repeating what I have already said, but all hon. Members will appreciate that the combined total is £100 million more than the combined total in last year's Bill.

Mr. Janner

I am afraid we could not possibly accept the explanation given by the Financial Secretary on the point raised by my hon. Friend the Member for Battersea, North (Mr. Jay).

I cannot see how anyone can possibly accept a Clause of this nature, giving a blank cheque to the Government, without having some kind of explanation as to the manner in which this sum of £500 million is to be used. I think it highly relevant to the issue of the Clause standing part of the Bill that we should inquire of the Financial Secretary, or someone else who can give an answer, as to what is really intended to be done if this £500 million is permitted by the Committee as an issue by the Public Works Loan Commissioners for the purposes of local loans.

I should not be prepared to be a party to the acceptance of this Clause unless I were assured that it was to be of benefit to the local authorities concerned. Wherever we look we find today local authorities complaining that they will be placed in a great difficulty in consequence of the terms of these advances. Last night I casually picked up the "Western Mail" and found that two local authorities, Llanelly and Aberystwyth, complained about the loan that it was intended to produce for their benefit, or otherwise.

The passage read as follows: Calling the attention of Llanelly Finance Committee to an item of £45,000 in connection with a public works loan… which arises, of course, if we accept this Clause— Mr. Glanville Williams said 'The Government's decision is going to have a very bad effect upon every public authority. It will mean that our rates will be increased and the rents of council houses raised from 3s. 3d. to 5s. a week.' A similar view was given in regard to Aberystwyth.

6.30 p.m.

It is not only those two councils. There are other councils throughout the country, as the hon. Gentleman must surely know, who are of the same opinion. The reason is because at the present time they are not aware of how they are to be met with regard to the rate of any interest which is to be required of them under those loans. The acceptance of these loans is a matter of concern, not only to the local authorities, but to every hon. Member of this Committee. Because if this is accepted, and if perchance—

The Chairman

I would point out to the hon. Member that there is on the Order Paper an Amendment dealing with the rate of interest and that that has nothing to do with the Clause now under discussion.

Mr. Janner

With great respect, Sir Charles, the Committee cannot possibly be expected to agree to the acceptance of a Clause which says that a sum of £500 million may be issued by the National Debt Commissioners without being told what it is for, or how it is to be used, and what interest charges are to be made.

How can the Committee possibly come to any conclusion on a Clause like this unless they have some idea of how the money is to be used? I say it is highly relevant, particularly if we know that not only people in council houses will be charged higher rentals if the interest is higher, but that the whole of the rent control system will be attacked; because additional rates which have to be paid will be charged to the tenants not only of council houses, but also of other houses.

The Chairman

That was the point I was making. I have to be guided by the rules of debate, and on the question "That the Clause stand part of the Bill" we can discuss only what is in the Clause. The hon. Member knows that quite well.

Mr. Janner

Naturally I bow to your Ruling, Sir Charles, but I am trying to persuade you to see, if I possibly can, my point of view with regard to the absurdity—if I may say so with respect—of any Committee of this House accepting a Clause which is so absurd as to say, "We will allow £500 million to be loaned by the National Debt Commissioners," just like that, without knowing what on earth for. No House of Commons and no Committee could possibly be expected to accept a Clause of that nature.

The Chairman

Yes, but I have to be guided, not by common sense, but by Erskine May. On page 538 he has laid down, perfectly clearly, that: Debate upon this question must be confined to the clause as amended (or not amended)… I am afraid we cannot go beyond that.

Mr. Janner

That being the case, I say, bluntly and categorically, that I am against the acceptance of a Clause of this nature which has nothing within it to indicate how the money is to be used, what it is to be used for or what interest rates are to be charged for it. I think it would be criminal for the country to accept a Clause of that description knowing full well that if that money were accepted a vast number of people in this country would be deprived of considerable benefits which have accrued to them before this money was accepted.

Mr. J. A. Sparks (Acton)

The explanation given to my hon. Friend the Member for Battersea, North (Mr. Jay), by the Financial Secretary was very hazy and most unsatisfactory. The Clause we are considering refers to a sum of £500 million which it is proposed to place at the disposal of the Public Works Loan Board for advances, not commitments undertaken, but for loan advances in the coming year. I think the Committee is entitled to hear from the Financial Secretary how that £500 million will be allocated during the coming 12 months.

We must understand that although last year the sum of £500 million was similarly placed at the disposal of the Public Works Loan Board, they actually advanced, in round figures, only £335 million out of that sum in loans to local authorities for a variety of purposes; and so there was a balance of £165 million not taken up, or not issued by the Board. Again, included in this figure is the most important figure for housing. Again speaking in round figures, an amount of £225 million was advanced last year by the Board specifically for local authority housing schemes.

I consider that the Financial Secretary ought to be in a position to explain to us exactly the effect of the policy of his right hon. Friend regarding housing allocations in the future—on the basis of fifty-fifty for local authority houses and houses built by private builders for sale or to let—is likely to have on the amount of loans advanced by the Public Works Loan Board. I contend that in the coming year it will not be £225 million for advances to local authorities for housing purposes, but an amount substantially lower than that. The Financial Secretary should be in a position to tell us, because we have heard that the Government are to aim at a target of 300,000 houses a year.

If the Financial Secretary is thinking of giving the explanation that the Board will expend more money to local authorities for housing purposes out of the £500 million, I would remind him of what was said by his right hon. Friend on this point on 13th November: The right hon. Member for Bishop Auckland then asked when we should reach our target…He asked me at that Box if we should reach it in 1951. My answer is, 'No.' Nor, I fear, in 1952."—[OFFICIAL REPORT, 13th November, 1951; Vol. 493, c. 852.] So the Government view is that they do not expect the amount of money advanced for housing from the Public Works Loan Board to be very much more than the sum which appears in the accounts of the Board for last year. I think we are entitled to ask the Financial Secretary to explain the implications of the new housing programme of the Government and its effect on the expenditure of the Board.

In my view the estimate of £500 million given here is fantastic, because if this new policy on housing is to be pursued it means that advances to local authorities for housing purposes must be substantially lower next year than last year. That, in turn, makes good a case for the reduction of the amount of £500 million to a lower figure.

It must be remembered that the Minister of Housing and Local Government tells us that the policy of the Government now is to grant 50 per cent. of licences to private builders as against 50 per cent. of houses built by local authorities. In other words, private builders may now build an equal number of houses for sale or to let. The effect of that on the matter we are discussing is that it inevitably means the reducing of the number of houses built directly by local authorities and that means reducing the amount of loans applied for through the Public Works Loans Board; because if the number of private licences is increased the financing of that private side of the housing programme does not affect the functions of the Board. The finances for private building will come from different sources altogether.

Mention was made of the Small Dwellings Acquisition Act and to some extent it may be affected. But most private builders who build houses for sale do not go to the local authority for advances. They have arrangements with building societies and other people to finance their schemes; and I think that the increase in the private building of houses will call for a reduction in the amount of money advanced by the Public Works Loan Board.

It is, therefore, vitally important that the Government should explain to us precisely what they are proposing to do with this £500 million. I maintain that they do not know; that the Financial Secretary has not the foggiest notion of what is to happen to this £500 million or in what way the new policy of the Government of housing will affect loans advanced by the Public Works Loan Board to local authorities.

Before we pass from this Clause we should have a cast iron statement from the Financial Secretary that the number of dwellings built by local authorities last year, which secured advances of £225 million from the Board, shall not be cut down; that the local authorities shall not be deprived from carrying through the housing programme they have already agreed upon; that those undertakings shall not be sabotaged by causing local authorities to run down their housing development in order to give more licences to private builders to build houses for sale.

It is no use the Financial Secretary saying that a lot of these houses built by private enterprise will be let, because the figures in the Housing Returns do not show that at all. The number of houses built by private enterprise to let, as against the number built for sale, is most insignificant. I would again press the Financial Secretary to give a clear and realistic statement of how this money is to be disposed of in the coming 12 months; and to give to the Committee an undertaking that the amount for local authority housing schemes will not be interfered with in the coming year, or that their programmes already laid down will not be reduced to provide more licences for private builders.

If he can give us a guarantee that the housing programme next year will not be reduced so far as local authorities are concerned, and that advances by the Public Works Loan Board for housing next year will be at least as much as last year, if not more, he will go a long way towards satisfying some hon. Members on this side of the Committee.

Lieut.-Colonel Lipton

My hon. Friend the Member for Acton (Mr. Sparks) has put a number of cogent and searching questions to the Financial Secretary, but I doubt whether he will obtain any satisfaction. Nevertheless, it is certainly worth while, in the public interest, that questions of that kind should be addressed to the Government, so that the general public may realise the unsatisfactory features of the Clause which we are now asked to accept. All I know about the effect of this Clause is that, so far as the borough of Lambeth is concerned, it will raise the rents of council houses and flats by 5s. 6d. per week.

6.45 p.m.

Mr. Boyd-Carpenter

On a point of order. The hon. and gallant Gentleman is directing attention to a subject which, as I understand it, does not come within the Clause—rates of interest. If the hon. and gallant Gentleman is allowed to develop that subject, it will be inevitable when I come to reply that I shall have to deal with it, and I would like to have your guidance, Sir Charles, in finding out if I shall be permitted to do so.

The Chairman

No, the hon. and gallant Gentleman certainly would not. I have tried to explain to the Committee that we may only deal with what is in the Clause, and I ask the hon. and gallant Gentleman to confine himself to that subject.

Dr. Horace King (Southampton, Test)

Further to that point of order. Surely the Clause mentions the provision of a loan of some £500 million. That must be lent at some rate of interest.

The Chairman

There is nothing at all in the Clause about the rate of interest. There was an Amendment, which was negatived, and there is nothing about the rate of interest before the Committee. We really cannot have a discussion on it. That is according to the Rules of Order.

Mr. Scholefield Allen (Crewe)

May it not be in order, Sir Charles, to ask what is the rate of interest or whether the money will be lent interest-free?

The Chairman

I do not know about that, but the rate of interest is certainly not to be discussed.

Mr. Janner

Further to that point of order. I hope that you will give us an opportunity, Sir Charles, of seeking your advice at a later stage, after you have perhaps had an opportunity of consulting Erskine May. It would be an absurd thing to have a Clause referring to a loan, as we have here, and not be able to discuss what the loan is about and what rate of interest is to be charged. We cannot possibly deal with the Clause unless we know the basis of the loan itself, and, to me, it seems incredible that such a rule should have been fixed at any time. If it has been fixed, could you direct us so that we may get the rule changed?

The Chairman

I am only carrying out the Rules of Order. The hon. Gentleman asks if there is any opportunity of changing them. I am afraid not. On Third Reading, the position will be exactly the same as it is now. I am afraid that that is the rule, and that I cannot help the hon. Gentleman.

Lieut.-Colonel Lipton

I am anxious to follow your ruling, Sir Charles, and my comment is that every local authority and every ratepayer will be out of pocket as a result of accepting.

There is one other point to which I should like to direct the attention of the Financial Secretary. We now have a Government which is pledged to a policy of economy—"great and grave cuts and savings"—and, in connection with this Clause, I want to put to the Financial Secretary a suggestion which, I hope, will help the Government to effect some of these "great and grave cuts," as they have been mysteriously described, or not described, so far. I hope my suggestion will help the Financial Secretary and the Government to achieve some economies.

As a matter of fact, since the present Government came into power and until now, the House has been asked to provide more money over and above what was required in the past. The Clause refers to a body known as the Public Works Loan Commissioners, and they are a number of highly reputable people who constitute the Public Works Loan Board. A very important thing happened in connection with the work of the Board when the Local Authorities (Housing Loans) Act of 1945 came on the Statute Book, and the changes that were made in the functions and the duties of the Public Works Loan Board by that Act are now beginning to make themselves manifest.

In my submission, and in the hope that the Financial Secretary will make a note of it for future use and investigation, the Public Works Loan Board has ceased to serve any useful purpose whatsoever, especially in view of the 1945 Act, to which I have referred. What happens when a customer goes to the Board and asks for a loan? The customer is invariably a local authority, and, when a local authority goes to the Board for a loan, three separate bodies intervene or have a say in the matter.

First of all, there is the particular Government Department which sanctions the loan. It may be the Ministry of Health. The Ministry of Housing and Local Government, the Ministry of Education, or any one of a variety of Government Departments which act as the sanctioning authority to enable the local authority to obtain the loan. Then, we get the Treasury coming into the picture, especially by virtue of the powers vested in the Treasury under the Borrowing (Control and Guarantees) Act and, in addition to these two very important sections of Government administration, we get the Public Works Loan Board, consisting of these highly eminent and reputable gentlemen, the Commissioners.

The last report of the Public Works Loan Board, was made available to hon. Members only a few years ago, and it is the report for 1950–51. I respectfully suggest, for the attention of the Financial Secretary, that, in future, arrangements should be made to enable hon. Members to have the annual report of the Board in sufficient time to enable them to study the document with the' care and consideration which it deserves, so that when this particular Bill comes before the House, we shall have some kind of background knowledge or information as to what the Board has been doing during the preceding 12 months. That must be for the benefit and convenience of hon. Members, and I am glad to note that, by an approving nod of the head, the Financial Secretary seems to think that there is some validity in that point.

When I examined the 1949–50 Report of the Public Works Loan Board, I found that there were some 13,000 applications, and that £292 million had ben advanced. Out of those 13,676 applications, which gives some idea of the extent to which the Board acts as a kind of controlling and governing body, only one parish council was unsuccessful, in an application involving £1,923. In that case, too, the unfortunate parish council was unsuccessful in its application only after the Public Works Loan Board got in touch with the Treasury to make quite sure that it was safe in rejecting that particular application. Out of a total advanced of £292 million, only one application involving £1,923 was rejected.

When we come to the annual report of this body, which has just come into the Library of the House, we find that, last year, the number of applications for advances has gone up and that not one single application from a local authority has been unsuccessful. That means, of course, that the sanctioning Government Department and the Treasury have taken good care to see that the local authority cannot or does not get as far as the Public Works Loan Board if there is anything wrong with the application, so that what the Board does I do not know.

All I know about the activities of the Board is what is contained in a very thin pamphlet. In the old days, the Public Works Loan Board used to issue an annual report of 80 or 90 pages, but it has now come down to about 12 pages, with a few tables of statistics and appendices. If we look at the estimates on this matter, in which I have no doubt the Financial Secretary must be interested, we find that the Board has a staff of 93 persons, whose wages last year were nearly £46,000. If we add to that the amounts included in the estimates of other Departments in connection with services provided by the Board, the total is brought up to over £74,000.

It seems to me that the work of the Board has become quite unnecessary and that the National Debt Commissioners or one or two rooms at the Treasury could handle the whole situation to the benefit of the taxpayer and with savings to the general costs of administration. I cannot possibly expect the Financial Secretary to give me any assurances on the points that I have put to him, but what I do ask of him is that, if he holds his present office for the next 12 months and he finds it once again necessary to come to the House and ask us to agree to some further advances or further perpetuation of the Board, he will, in the meantime, have satisfied himself that this body serves a useful purpose. If not, I hope he will agree that it ought to be abolished.

The work carried out by this organisation could just as well be carried out by the Treasury exercising general control over the operations of the National Debt Commissioners, who, in the course of their duties, are just as capable, subject to Treasury control, of making the further advances that are necessary to local authorities.

Dr. King

Within the very narrow confines which your illustrious predecessor laid down for the discussion of this Clause, Sir Charles, I want to declare my opposition to the Clause as it stands, because I regard it as the main part of the Bill whose objects are to lower the standard of living of millions of our people and, at the same time, to raise the standard of living of some others.

If I may paraphrase the speech with which the Parliamentary Secretary introduced this Clause, I would say that it and, indeed, the Bill itself, seeks to rob the ratepayer to benefit the taxpayer, the Government having robbed the taxpayer by other measures in order to benefit the banker and financier. As this Clause is the instrument by which part of that policy is carried out, I want to declare my opposition to it.

The bankers of this country have for a long time declared that it is their policy to check the personal consumption of millions of people, except bankers and financiers, and two alternative methods seem to have occurred to the financiers and business men. One was that advocated by the Association of British Chambers of Commerce to the former Chancellor of the Exchequer when they said that local authorities should be sent to the bankers to borrow their money more expensively, and the other is the policy which this Government is carrying out in this Clause and in various other acts of policy, which have gained the commendation of the "Westminster Bank Review" in its current issue, which praises the Government's policy in regard to the bank rate, the Treasury Bill rate and the Public Works Loan Board.

Mr. John Hay (Henley)

On a point of order. Is the hon. Gentleman in order in referring to this particular topic of interest rates again? I would submit that it is out of order, and has nothing whatever to do with this Clause.

The Chairman

Perhaps the hon. Member for Southampton, Test (Dr. King), was not present when I gave the previous Ruling. The rate of interest does not arise on this Clause.

Dr. King

I am sorry if I mentioned the rate of interest. I mentioned the Bank rate as an illustration of something else which had taken place in regard to Government policy.

The Chairman

There is no mention in this Clause either of bankers or rates of interest.

Dr. King

May I say, then, Sir Charles, that I am opposed to this Clause because it has gained the approval of the bankers of this country, because, indirectly, it benefits those who live on interest, and because its effect must be to raise the rents and so lower the standard of living of millions of people? I also oppose it because it is an instrument by which the Government prevent the local authorities from carrying out vital social expenditure on behalf of our people.

7.0 p.m.

Mr. E. Fletcher

I feel that we ought not to part with this Clause without having a further word from the Financial Secretary to the Treasury.

Mr. Boyd-Carpenter

I had every intention of rising and, indeed, I was only waiting until the hon. Member for Islington. East (Mr. E. Fletcher), whom I saw rise, had made his speech. I shall certainly do so at a reasonable opportunity.

Mr. Fletcher

I am very grateful to the hon. Gentleman. The knowledge that he is to reply will enable me to put my questions to him because I know that the Committee will wish, as he will, that we should not leave this Clause in the obscurity in which it will be left unless we have some further explanation from the Financial Secretary about the figures in it.

I am sure, Sir Charles, you will be very glad to know that I do not propose to make any reference to rates of interest. I propose to confine my few remarks to trying to elucidate what is the policy of the Government with regard to the figures in Clause 1. Take the figure of £500 million. Surely, as my hon. Friend the Member for Battersea, North (Mr. Jay), pointed out, this figure must have been chosen because the Government must have had a clear idea of what their housing policy for 1952 was. and the Committee and the country are anxious to know what are the Government's real plan as regards the number of houses to be built in 1952.

They have already thrown overboard the target figure they proclaimed in their Election manifesto, because, after all, the measure of their housing achievement in 1952 can only be determined according to the amount of money which they provide for housing. They have provided precisely the same figure for borrowing by local authorities as was provided last year. In fact, they have provided less because the amount to which the Public Works Loan Board is committed is larger than it was on previous occasions. The Board is already committed to advance £420 million out of the £500 million which the Government are providing, and as the hon. Gentleman knows a larger proportion than ever before of that sum is for purposes other than housing.

As my hon. Friend the Member for Battersea, North, pointed out, at this time last year as compared with the £241 million provided for housing, £95 million was available for other local government purposes. But thanks to the policy of the late Government, provision was made during the year 1951 for extending not only housing but also the social services of this country other than housing. That is why we find—and I am quoting here from the figures given by the hon. Gentleman himself—as he pointed out, that of the £416 million, which I think should be £420 million—

Mr. Boyd-Carpenter

If I may interrupt the hon. Gentleman for a moment. It is a very small point. The £416 million is up to 31st October, and the £420 million is up to a date early in November.

Mr. Fletcher

I am obliged to the hon. Gentleman. Let us take the figure as being £416 million. I ask the hon. Gentleman to observe that of that sum which represented the total commitments at 31st October, while £260 million was for housing, £156 million was also provided for other local government purposes, thanks to the policy of the present Opposition when in power.

We understand that the present Government are to cut down on all social services and notably on education. This is not the time to go into the very grievous cuts which are foreshadowed in education and which are creating great alarm among all education authorities throughout the country. We shall come to that. But be it noted that the Public Works Loans Board is committed to an expenditure of £420 million to be spent this year and that the hon. Gentleman is only providing £500 million. True he is extending the figure for commitments, but we want to know what is the Government's policy for housing in 1952.

According to these figures, the hon. Gentleman cannot possibly increase the amount of housing to be produced by local authorities. I am well aware that the Ministry for Housing and Local Government have announced that they are to increase the provision of houses by sources other than local authorities and that local authorities are to be given permission to enable private builders to build one for one. Can it be envisaged that that ratio will be common throughout the country, and can it be that the Government are seeking to achieve their target by enabling as many houses to be built throughout the country by private enterprise as by local authorities? It is evident from the amount of money which the Government are providing for local authorities that the number of houses built by local authorities must be a diminishing one.

I could, perhaps, see some merit in the Government's policy if they were going to enable people of modest means, for whom houses for sale might be built, to borrow under the Housing Act or the Small Dwellings Acquisition Act the sums they will require to buy such houses. But I would point out to the hon. Gentleman that if it is the intention of the Government to enable such people who want to buy houses to do so on satisfactory terms then provision must be made for that under the present Bill. But that, again, requires money, and no money is being provided for it.

As the hon. Gentleman knows, the Public Works Loan Board during the last year, according to the Report just published, advanced under the Housing Acts approximately £4,500,000 and under the Small Dwellings Acquisition Act a sum of £12 million. I can understand the Government saying that they will build more houses for sale and will give people the opportunity of buying those houses by borrowing on advantageous terms under the Housing Act. But they are not doing that. They are not making any additional provisions to enable local authorities to advance loans. To do that, they would have to increase the amount put in this Bill, which they are not doing.

I think the whole situation is most unsatisfactory. People will be driven to the conclusion that the policy of the Government is to cut down on the number of houses that will be built in this country, and that this is an indirect method of doing so, because if they were serious in their protestations they would be bound to have provided more money for local authorities. They stand convicted out of their own mouths of insincerity and humbug and of misleading the country during the Election.

Mr. Edward Short (Newcastle-upon-Tyne, Central)

I wish to say a few words on the implication of this Clause, to which my hon. Friend the Member for Islington. East (Mr. E. Fletcher) briefly referred, as it affects my own constituency. We have here the sum of £500 million allocated to the Public Works Loan Commissioners. There is apparently no intention of increasing this amount, though the Government won the Election, or they "kid" themselves they did, on a promise to build 300,000 houses a year. All the indications are that they can build only 200,000 houses according to the figures given. If that is not the case, then it is obviously the policy of the Government that a very large number of houses shall be built by private builders for sale, and it is no good hoping that any large number of houses will be built for letting.

At present prices none will be built for letting, but all for sale. If that is the case then in my own Division, which is probably the worst housed division in the United Kingdom, a great many people will have to wait much longer for houses owing to the diminution of the criterion of need, and because half the houses will be available to people who have a minimum capital of about £200 and who can afford to pay about £2 a week by way of building society charges.

I take a very serious view of that, and I sincerely hope that is not the Government's policy. I am a member of the City Council of Newcastle-on-Tyne, and I shall do all I can to persuade them and other local authorities in the North-East not to vary the proportion of 1–5, and all I can to persuade local authorities throughout the country generally to retain that proportion. So long as we have our appalling waiting lists, it would be criminal to allow 50 per cent. of houses to go to people who have a minimum capital of £200 and who can afford to pay crippling charges for the next 20 years or so. This is the implication of this Clause as it affects my Division

Mr. Boyd-Carpenter

I will deal with the various points put to me in this debate. The hon. Member for Leicester, North-West (Mr. Janner), raised the general proposition, from which I do not dissent, that we must be satisfied that this Clause will be to the benefit of the local authorities concerned. I do not think there is very much difficulty about that for, unless this Bill becomes law, the main source of borrowing open to local authorities will dry up. Therefore, it is without any doubt essential in the interests of the local authorities that these funds should be made available for them to borrow from.

Mr. Janner

Supposing an interest rate of 100 per cent. were charged, does the hon. Gentleman think that the local authorities would be able to borrow this money?

The Chairman

I have asked so often that the matter of interest should be left out of this debate, that I hope hon. Members will really try to do it.

Mr. Boyd-Carpenter

As the hon. Gentleman will realise, that Ruling prevents my joining him in his interesting speculation.

What this Clause does, at any rate, whatever else is in it, is to make a very large sum of money available for borrowing if the local authorities desire to borrow it. Therefore, the answer to the hon. Gentleman's question is that it is emphatically and overwhelmingly in the interests of the local authority.

The hon. Gentleman seemed to think that the Clause was inadequate in that it gave insufficient details of the purposes for which the money would be spent. Indeed, he used the expression the "absurd Clause." Be there any force in that, then the hon. Member for Battersea, North (Mr. Jay) must stand equally with myself charged with absurdity, because last year's Bill contained a Clause identical in terms with that which the hon. Gentleman describes as absurd.

Mr. Janner

But the then Minister used it properly.

Mr. Boyd-Carpenter

The hon. Gentleman did not refer to the Financial Secretary, but to the Clause, and this Clause and the one contained in the Bill last year are, in fact, identical.

The hon. Member for Acton (Mr. Sparks) inquired as to the system on which these loans would be issued. As I understand it, the approval of the Departments concerned with the applications to the Commissioners remains the same. The hon. Gentleman then referred to another matter in which I cannot follow him very far without transgressing your Ruling, Sir Charles, as to the effect of this new Clause on the new ratio of local authority and private house-building announced by my right hon. Friend a day or two ago. He suggested that because of that announcement the local authority borrowings were excessively high.

I would say that my right hon. Friend's statement merely indicated that changes in the ratio were permissible at the option of the local authorities. As far as we are concerned, we must provide funds adequate to deal with local authority demands in the event of their not using the authority, as some may not, to alter the present ratio. We are not trying to force them to use the new high ratio of private building by providing inadequate funds, and that is why we must adhere to the figure of £500 million, as set out in the first part of the Clause.

Mr. Short

In that case, are the funds which are provided sufficient to build 300,000 houses if the 1–5 ratio is retained?

7.15 p.m.

Mr. Boyd-Carpenter

I cannot enter into that without entering into the question of housing costs. We are seeking to provide, as previous Bills have always provided, a sufficient sum, with a margin, to cover the requests that the local authorities may make to us. That is the function of the Bill.

Mr. Sparks

This is a very important point. Is it the intention of the Government that the target of 300,000 houses shall be for those built by local authorities or is it intended that that target shall be divided equally between private builders and local authorities? Whether the funds available are sufficient or not depends upon the hon. Gentleman's answer to that question.

Mr. Boyd-Carpenter

The hon. Gentleman knows perfectly well that if that question is to be directed to anyone in this House it should be directed to the Minister of Housing and Local Government. I beg the hon. Gentleman to recall that we are here concerned with providing an adequate financial base for the demands that the local authorities can conceivably put forward. That is the point at issue. I cannot possibly trespass upon a matter which is the affair of my right hon. Friend or of the local authorities. Our function is the lowlier one of providing adequate funds.

Mr. Emrys Hughes (South Ayrshire)

I wonder if the hon. Gentleman can solve a problem for me. It is a matter that I have put to other hon. Members of the Government Front Bench without success. I have a great admiration for the hon. Gentleman and I hope he can supply the answer. He has spoken about the £500 million financial base for housing. I quite appreciate the point that he does not deal with housing, but could he tell us how much of the £500 million financial base goes to Scotland? I have often tried to find out, but very unsuccessfully, what proportion of the 300,000 houses is to go to Scotland.

Mr. Boyd-Carpenter

I cannot say anything about the 300,000 houses, as the hon. Gentleman knows. As regards the £500 million, what proportion goes to Scotland will depend, in the first place, on what the Scottish local authorities ask for, and, in the second place, on what the Departments concerned with housing in Scotland recommend.

Mr. Hughes

Will they get what they ask for?

Mr. Boyd-Carpenter

They will be dealt with in the same way as local authorities in England. I do not think the hon. Gentleman need be apprehensive that Scottish local authorities will be laggard in coming forward to ask for money.

To continue my reply to the hon. Member for Acton, I would again remind him that, the new ratio being permissive, we must provide adequate funds on the basis that local authorities must be absolutely free to use the new ratio or not.

Mr. Sparks

Do I take it that, if a local authority decides not to adopt the suggestion which, for reasons best known to themselves, the Government are making, no pressure will be brought to bear on the local authority to conform to the suggested ratio?

Mr. Boyd-Carpenter

That is not a matter with which I can deal. If the hon. Member wants to put a question on housing policy he really must put it to my right hon. Friend who is responsible for housing, and not direct it to the Treasury, for we are concerned only with providing the financial base.

Mr. Donald Chapman (Birmingham, Northfield)

The hon. Gentleman says that it is the Treasury's job to provide an adequate financial basis. It must be an adequate financial basis for a total number of houses which one can hypothecate, and if one is envisaging a larger number of houses, and the ratio remains the same, a larger figure will be required in the. Bill.

Mr. Boyd-Carpenter

The hon. Gentleman is, I believe, recommending us to increase the figure in the Bill. I can only assure him that, taking advances and commitments together, we have made an advance in all of £100 million over the total thought necessary last year. I can assure him that we feel that that figure is adequate to cover the possible demands that will be made. It will, of course, always be open to the Government, if the funds made available in the Bill prove to be inadequate, or if they approach exhaustion, to come to Parliament with a request for further advances or further commitments.

The hon. and gallant Member for Brixton (Lieut.-Colonel Lipton) indulged in a little hyperbole when he said that acceptance of the Clause would mean that every local authority would be out of pocket. All we are giving to the local authorities is an opportunity to borrow. The hon. and gallant Gentleman is a little unfair to the Clause. His suggestion about the annual report of the Commissioners is a valuable one, and I will certainly see that it is considered. I appreciate that it is an advantage to the Committee, when discussing these important, intricate and difficult matters, to have the report available as soon as possible, and I will do my best to see that the suggestion is conveyed to the proper quarters, for I think that it is a very helpful one.

As regards the future of the Commissioners, the hon. and gallant Gentleman will appreciate that I am not in a position to answer him tonight. On first reaction, it seems to me, that to be able to issue loans of £350 million at a cost of £46,000 is not a sign of inefficient activity, but His Majesty's Government are always prepared to look in any direction in which greater administrative efficiency can be obtained.

The hon. Member for Southampton, Test (Dr. King) said that he was opposed to the Clause as it stood and that it would lower the standards of living of our people. I am sure that when he re-reads the Clause he will not think that. I do not think that the providing of a large sum of money for local authorities to borrow could have that effect. Surely it must have the contrary effect in that it provides the money with which local authorities are able to carry on their beneficent activities in a great many directions.

The hon. Member for Islington, East (Mr. E. Fletcher), referred again to the figures in the Bill, and I want to say a word about that. He pointed out that £416 million—or £420 million, if we take another date—was already committed. That is not fairly subtracted from the £500 million in the Clause unless there is added on the other side of the account the rather larger figure of £450 million for new commitments which may be incurred. I hope the hon. Member appreciates that and also that we are increasing the overall total for advances and commitments.

The hon. Member made a remarkable observation. He said that the commitments at 31st October of £416 million contained an inadequate proportion for housing as a result of the policy of the present Administration. Really! The figures are those of 31st October, and my right hon. Friend the Prime Minister only kissed hands on 27th October. To suggest that it is the fault of the present Administration if the figures represent an inadequate proportion is pressing rather far the doctrine of Ministerial responsibility. I can tell him why, in defence of right hon. Gentlemen opposite—

Mr. E. Fletcher

The hon. Gentleman has misunderstood what I said. What I said was that on this occasion the amount provided for services other than housing was considerably higher than it was on the previous occasion.

Mr. Boyd-Carpenter

Yes, and the hon. Gentleman will agree with me that his remark that that reflected the policy of the present Administration is one that cannot be sustained. I will explain to him now why these figures bear a different proportion to the annual figures. It was a point into which I had to go when I first saw the figures. The reason is that the non-housing expenditure represents work which generally takes rather longer to do than the building of a house. It takes longer to build a public building such as a school than to build a house. Therefore, when we are dealing with forward commitments, we get a larger proportionate element of non-housing expenditure than when dealing with a closed period of a year of housing and non-housing activities. I hope that will acquit the late Government in the eyes of the hon. Member.

I apologise for repeating it, but the idea I should like to leave in the minds of the Committee is simply that this is the Clause that provides the money. If the Committee do not accept the Clause, the money available for borrowing by local authorities will be exhausted before a very long period had elapsed. No hon. Member, whatever his views on other financial policy, wants that to happen, and I hope, therefore, that we may be allowed to have the Clause.

Mr. Jay

I only want to say that we on this side, of course, do not oppose the Clause. It is necessary to have the Clause in order that these programmes can go forward. I hope, therefore, that we shall approve it and that we shall do so soon, if not now. We are far from satisfied, however, with the Financial Secretary's answers to the questions we have addressed to him. In particular, he is in error, in his effort to answer my questions, in suggesting that the total of advances, plus commitments, in the Bill is a measure of the work done during the year.

Mr. Boyd-Carpenter

To be done.

Mr. Jay

I gave a year ago, in the speech to which the hon. Gentleman has just referred, the reasons for the total of advances and commitments.

The first reason is that local authorities were being able to plan rather further ahead. The second is the reason mentioned by the hon. Gentleman just now—but not until just now—that an increasing number of schemes are rather larger schemes which take a greater number of years to complete. Therefore, the increase in the total from £850 to £950 million has nothing whatever to do with the actual volume of work done during the year.

Indeed, I pointed that out in my speech on Friday, and the hon. Gentleman did not question it at the time. It was not until today that he improvised the argument that the actual total of advances did not fairly measure the amount of work done during the year, and I think that the reason why he did not produce it until today was that he had not quite seen the implications of his own statement on Friday.

The fact remains, looking at the hon. Gentleman's speech on Friday, that he told us that the total to be advanced this year will not be substantially greater than last year. I submit that the conclusion still follows, clearly, from the debate we have had, that that means that no substantially greater number of houses is to be built. If that is not so, will the hon. Gentleman now, or his colleague from the Ministry of Housing and Local Government tell us the actual number of houses that the Government intend to build?

Mr. Boyd-Carpenter

I do not want, any more than the hon. Gentleman, to detain the Committee, but I am bound to say to him that the inference which he seeks to draw from the figures of the Bill is not one that I am prepared to accept. I ask the hon. Gentleman—not now, but when he thinks it over and, perhaps, reads HANSARD—t0 appreciate that we are here making available to local authorities £100 million more of advances, plus commitments, than was thought necessary last year. I ask the hon. Gentleman to bear that in mind and not to seek to draw inferences from the housing programme. All I can say is that I do not accept the inference that the hon. Gentleman seeks to draw, but the future will prove, no doubt, which of us was right.

Clause ordered to stand part of the Bill.

Clauses 2 and 3 ordered to stand part of the Bill.

Bill reported, without Amendment read the Third time, and passed.