HC Deb 19 November 1952 vol 507 cc1920-33
Mr. Jay

I beg to move, in page 2, line 7, to leave out "one thousand and fifty," and to insert "eleven hundred."

We have put down this Amendment in order to elucidate the present rather obscure position arising out of the relation between this Bill and the discontinuance of the Local Loans Act, 1945, by the Expiring Laws Continuance Bill. We are concerned in this Amendment with the figure of £1,050 million which is contained in Clause (2, b). Before coming to my main point, I should like to ask the Financial Secretary one question about the reasons for the increase in this figure from £950 million to £1,050 million in the present Bill.

In his statement on Second Reading, the Financial Secretary said that it was necessary to have a margin to allow for contingencies. So far as it seemed to me, he did not fully answer my question, which was why these contingencies are £100 million higher this year than they were last year. It is the case, of course, that this figure has gone up by £100 million in each of the last three years.

I gave as an explanation in 1950, not that the actual volume of work is increasing very much, but that local authorities were able to plan their future commitments further ahead. It may be that that is the explanation now, but we would like to be sure that that is so. If it is not, we should like to have the contrary explanation.

Our main difficulty here is that this change in the method of financing these local authority programmes is being made this year. Having finished with the previous discussion, we will assume that there is to be an increased freedom for the local authorities to go to the open market, but that the more or less corresponding facilities are to be available to them as far as the Public Works Loan Board is concerned. Presumably, therefore, it is the belief of the Government that some use will be made in the course of the year of the open market, and to that extent a rather less requirement will fall upon the Public Works Loan Board.

Our complaint in this whole matter—and this is strictly relevant to this Amendment and is the reason why we have put it down—is that the Government this year have reversed the normal and, it seems to us, the logical order of these two Bills. Hitherto, we have always had the Expiring Laws Continuance Bill before us and the House has taken a decision on that. I emphasise that it is the House and not the Government that decides whether or not to approve of that Bill.

We then came to the Public Works Loans Bill and the question of whether other facilities were to be open to the local authorities had been settled. In the last few years no other facilities have been open to them, so that we knew clearly in determining these figures whether or not there were alternative sources of finance available.

This year, however, we are in a position still of not knowing whether this change in policy will be made. I apologise for referring to this, but it is essential to the argument because it illustrates the awkward position in which we have been put. Although the House has given a Second Reading to the Expiring Laws Continuance Bill it has not approved the later stages of that Bill, and therefore at present we do not know whether or not this change in fact will be made and will be passed into law.

It was for that reason that we felt it necessary to put down this Amendment. Suppose the House decided on the Third Reading or on one of the remaining stages of the Expiring Laws Continuance Bill not to make the change which the Government recommend. If that occurred the local authorities would not have the freedom, as the Financial Secretary calls it, to go into the City. Therefore, presumably, that is another argument why their need for finance from the Public Works Loan Board under this Clause should be increased.

It was to meet that eventuality that we—having more foresight than the Government, as it seems to us—put down this Amendment in order to help the Government and the local authorities. It increases the total overall figure of the financial commitments from £1,050 million to £1,100 million. It is impossible for us to estimate just how much finance the Government thought would have gone to the City if the House approved the Expiring Laws Continuance Bill, which we have not yet approved.

In introducing this point on Second Reading, the Financial Secretary himself argued quite clearly the precise contention which I am making now—that it is impossible to determine this figure of £1,050 million unless one takes into account what is happening to the Expiring Laws Continuance Bill. He denied that at a later stage of the debate, but at that moment, no doubt owing to the course of the debate and the many points of order raised, he did not quite recall what he had said earlier

In his original speech the Financial Secretary said: I am asking the House in this Bill"— That is the Public Works Loan Bill— to authorise the issue to the Public Works Loan Board of a certain sum of money—£500 million—and to authorise the commitment of £1,050 million. That is the figure with which we are now dealing. Then he went on, quite rightly as it seems to me: In my submission, it is clearly relevant to the question, aye or no, whether these figures are adequate that the House should say, aye or no, whether the Public Works Loan Board is going to be the only source from which local authorities, in substance, can borrow."—[OFFICIAL REPORT, 12th November, 1952; Vol. 507, c. 958.] I am sure that the Financial Secretary will agree that that means that we cannot decide this figure until the House has decided whether or not' the Expiring Laws Continuance Bill is to become law in its present form. Therefore, we, on this Amendment that raises this point, ask the Financial Secretary what I twice have asked him and, I think, three times have asked the Leader of the House. It is the very simple question why the order of these Bills was reversed this year and the House put in this exceedingly awkward situation.

If, as it seems to me, it is just another piece of muddle and confusion by the Government, then if the Financial Secretary will tell us so we shall understand that confusion might very well have happened again. If there is another reason, though I have not the remotest idea of what it could be, perhaps he will tell us what it is. But if we receive no explanation on this point after we have asked this question so many times, and in view of the fact that the House has not taken a decision on the other Bill and that it is a decision for the House and not for the Government to take, we shall feel disposed to press the point in this Amendment.

6.0 p.m.

Mr. Boyd-Carpenter

The Amendment would increase the figure provided for commitments in Clause 2 from £1,050 million to £1,100 million. As the right hon. Gentleman quite correctly stated, the provision in last year's Act was for £950 million, so that the Bill as it stands provides for a further increase of £100 million.

For the reasons which I gave at length on Second Reading, and which I hope I shall not have to inflict again on the Committee, we feel that £1,050 million is enough. The right hon. Gentleman will no doubt recall that on Second Reading I, gave figures showing the rate at which commitments had been incurred, and they seemed to indicate that a somewhat larger figure was necessary than that of last year's provision. Indeed, it is because of the running out of the authoritative commitments in the present Act—it is due to run out in the immediate future—that the Bill is necessary at the moment.

Obviously in those circumstances we should make some increase, and we have therefore proposed an increase of £100 million. We feel that that is sufficient, and if it is sufficient, that is adequate reason for not going further. We feel that it would be wrong to deprive the House of control over this matter for a period longer than necessary for practical purposes, and although this is a matter essentially of judgment and opinion rather than dogma, none the less, after very careful thought, we feel that £1,050 million is adequate, and, since it is adequate, that it would be wrong if the Committee, however well disposed that might show them to be towards the Government, forced on the Government authority for £50 million more than the Government desire.

The right hon. Gentleman reverted to the question of the order in which this Bill and the Expiring Laws Continuance Bill were being taken, and I hope we shall not revert also to the heat which that topic appeared to generate during the Second Reading debate. I think I may be allowed to say this in reply to the right hon. Gentleman, however: in the present circumstances, when account is taken of the urgency of the present Measure and of the fact that a different proposal underlies this Measure when compared with that of the last year—different in respect of the Local Loans Act—we felt that it was logically the right order. But we were anxious to meet the views of hon. Members opposite, as I think I am entitled to say we always are, and, as the Committee may recall, we sought to reverse the order in the Committee stage.

It may be recollected that when my right hon. Friend the Lord Privy Seal announced the business last Thursday, he gave as the first Order for today the Committee stage of the Expiring Laws Continuance Bill—that is to say, it would precede this Bill. As he made clear at the time, that was dependent on the Second Reading, which for many years has been a formal stage, being taken in adequate time beforehand. I make no complaint, but hon. Members opposite decided otherwise.

Be that as it may, the fact that it was possible to take the Second Reading no earlier than last night meant that the House would very properly have resented having to take the Committee stage a few hours after the Second Reading. In any case, I believe there would have been technical difficulties. I hope the right hon. Gentleman will not seek to make a grievance out of this, but if he does, I am entitled to point out that for the Committee stage, at any rate, we did our best to meet him, and it was not our fault that we were unable to do so.

Mr. Jay

While I am not making a grievance of it, if the Financial Secretary does not like that word, cannot he give some explanation of why, in the first instance, the Government decided to reverse the order?

Mr. Boyd-Carpenter

If the right hon. Gentleman had been listening, I gave two reasons earlier in my speech, and I am happy to repeat them if it gives him any pleasure. We thought, first of all, that in the different circumstances in respect of the Local Loans Act—and this is a matter of judgment and opinion, and I would not seek to dictate them to the right hon. Gentleman any more than he would seek to dictate them to me—this was the better order. If local authorities are not to be handicapped in relation to their commitments, we must bear in mind the urgency of the present Measure, for it requires, if there is not to be a hold up, to become law something like one month before the Expiring Laws Continuance Bill. We tried to meet the right hon. Gentleman and it is unfortunate that we were unable to do so—but at any rate it is not wholly our fault.

I think I can resolve his difficulty from a practical point of view by recalling to him, as I recalled on an earlier Clause, that this is not an annual Bill. If, as a result of other decisions taken on other Measures at other times by this House, it were to appear that the calculations we have made as to the amount required are inadequate, the only consequence would be that we should have to come back to the House a little' earlier than would otherwise be the case with the next Measure. That might be some inconvenience to the Government, but I do not think it would be any inconvenience to the House, and we should certainly see that it was no inconvenience to local authorities.

Mr. Albu

rose—

Mr. Fletcher

rose—

Mr. Boyd-Carpenter

I shall not keep the hon. Members very long, whoever may be called by the Chair, but perhaps it would be courteous if I summed up my remarks by saying that in those circumstances we feel that the figure which we arrived at very carefully—£1,050 million—is an adequate figure and, grateful though we are to the Opposition for seeking to force further authority upon us than we ourselves have requested, we cannot allow them to be so generous.

Mr. Albu

As the Financial Secretary said, this is not an annual Bill and therefore the sums which we include in the Clause might not be considered to be of vital importance, but I think I am right in saying that for many years it has by precedent almost become an annual Bill, and one can assume that the sums put into Clauses 1 and 2 are sums which Governments expect will roughly cover the required issues from the Public Works Loan Commissioners.

The Financial Secretary refuses to accept the Amendment on the ground that the figure of £1,050 million for total commitments is, in his view, sufficient for the coming 12 months, but in speaking on the Question "That Clause 1 stand part of the Bill," he said that the curve of expenditure by local authorities, particularly on housing—for which he took credit for the Government—was rising fast, and therefore one assumes that the issues by the Public Works Loan Board will also increase—unless, of course, as a result of the non-renewal of the appropriate Section of the Local Loans Act, which we are in the middle of discussing, local authorities have to find their finance elsewhere.

If the expenditure and investment of local authorities is rising fast and there is not sufficient power with the Public Works Loan Commissioners to advance the funds—for, even granted that it would be possible to bring in another Bill in a short time, the Government might have some difficulty in finding the time to do so—then I presume local authorities will be expected to obtain the funds elsewhere.

As some of my hon. Friends have pointed out, this raises considerable difficulties, because we all hope that the present ban on capital expenditure for industry will not last very long. We are all agreed that there has to be a very considerable increase in investment in industry, and the pressure by local authorities will be added to this pressure if industry themselves are in the market trying to raise money.

My hon. Friend the Member for Stechford (Mr. Roy Jenkins), speaking on the Question "That Clause 1 stand part of the Bill," pointed out, as I did on Second Reading, that these funds are not inexhaustible and that, if the Government expect the local authorities to go to the market for their funds, it will be all the more difficult for industry itself to raise funds at the same time and at reasonable terms—unless the Government really do restore what some of their hon. Friends have strongly demanded—discipline in the market—by allowing interest rates to rise very freely.

Some of us have been pointing out these rather obvious facts for some time, and all we have got is a certain amount of rather clownish abuse in the financial Press. Nevertheless, these are very real facts, and I should have thought that the Government would prefer to keep control of this very large amount of public investment in their own hands, so leaving the market much freer for industry to raise its funds.

The Financial Secretary said, in support of retaining the present figure of the limit of commitments from the fund, that he did not want to deprive the House of control of this investment. It seems to me that he is doing exactly the opposite by dropping this Section in the Local Loans Act, because he is thereby removing from the Treasury control of this local authority investment. I should have thought it would be better to increase the figure of the commitments allowed to the Public Works Loan Board in the way suggested by my right hon. Friend, so keeping within Treasury control this very important source of investment. The effect of what the Government are doing is exactly the opposite of what the Financial Secretary apparently intended, and I suggest that he ought to look at this again.

These sorts of statements combined with these sorts of Measures only increase our suspicion that it is intended to do what the right hon. Member for Blackburn, West (Mr. Assheton), the right hon. Member for Haltemprice (Mr. Law), the hon. Member for Kidderminster (Mr. Nabarro) and others on Second Reading wanted the Government to do, namely, to give up all control over these loans and restore the discipline of the market, which, as I pointed out on Second Reading, could only be done by a very radical reversal of the present distribution of the national income so as to provide very large private savings. What the Financial Secretary is doing is the exact opposite of what he is saying. He is removing control over these loans to some extent from the Treasury, and we do not know quite what other control is to be put in its place.

For these reason,. I hope the hon. Gentleman will think again about this Amendment, which seems to me to be necessary, even on his own estimates of the investment by local authorities at the present time.

Mr. E. Fletcher

The Financial Secretary conceded in his speech that the Government had made a mistake in trying to get this Bill through before the Expiring Laws Continuance Bill.

Mr. Boyd-Carpenter

I did nothing of the sort.

Mr. Fletcher

If that was not the purpose of the speech, what was the purpose of his quoting the announcement of the Lord Privy Seal last Thursday that in arranging business for this week it would have been much better to have got the Committee stage of the Expiring Laws Continuance Bill through before the Committee stage of this Bill was taken?

Mr. Boyd-Carpenter

The hon. Gentleman must not confuse good manners with admission of error. What I said, I hope with perfect clarity, was that it was done, not because we believed the order was wrong, but to meet the views of other sections of the House. I am sorry the hon. Gentleman should take what I had hoped was a well-intentioned and courteous attitude as being an indication of admission of error. It was nothing of the sort.

6.15 p.m.

Mr. Fletcher

I cannot be the judge of the motives which inspired the Government's decision last week, but I thought was entitled to assume from what the Financial Secretary said that on this occasion good manners coincided with an admission of error of judgment. After all, there is no necessary inconsistency between the two. I would not in any circumstances want to challenge the good manners of the Parliamentary Secretary. Nor would I want to put him in the embarrassing position of having to choose between good manners and an admission of error.

I think we are entitled to feel that both reasons played some part in what I thought was the commendable desire of the Government to see the Expiring Laws Continuance Bill through before the Public Works Loan Bill. But if it was due merely to good manners, then the Financial Secretary stands condemned out of his own mouth of an error of judgment, because quite obviously, as the course of this debate has shown, it is fundamentally necessary that the Expiring Laws Continuance Bill should be passed before we can complete this Bill.

The Financial Secretary did not attempt to answer the point made by my right hon. Friend, who pointed out that the whole purpose of this Amendment is to increase the provision of £1,050 million to £1,100 million, because at the present moment we do not know what the House will do about Section 1 of the 1945 Act.

Mr. Pannell

We have got a good idea.

Mr. Fletcher

But we are not entitled to forecast what the House will do. The Financial Secretary did not deal with that point. If we had got the Expiring Laws Continuance Bill through, we would then know for certain whether Section 1 of the 1945 Act was to be continued or not. On Second Reading the Financial Secretary went out of his way to make it plain that the reason he had inserted this figure of £1,050 million—

The Chairman

All this has been discussed before. We are now discussing a quite simple Amendment, which seeks to leave nut one sum and to insert another.

Mr. Fletcher

The reason we want to leave out £1,050 million and insert £1,100 million—which is the purpose of this Amendment, which I, for one, hope we shall carry to a Division in order to register our protest at the muddled position to which the Government have brought us—is that we do not yet know whether or not local authorities will have any other source of borrowing. The Financial Secretary has told us that he put this figure in the Bill because he assumed that local authorities would have some other source of borrowing. When we reach the Committee stage of the Expiring Laws Continuance Bill, we shall find an Amendment put down to re-insert Section 1 of the 1945 Act.

The Committee may decide to carry that or it may not, but the Financial Secretary, for all his competence, must not get into the habit of assuming that the Committee will do what the Government want. That would be treating the Committee with great contempt. The Committee is free to decide whether Section 1 of the 1945 Act should stay or whether it should not. If the Committee decides in a sense contrary to the wishes of the Government, it follows, as my right hon. Friend has said, that this figure of £1,050 million would be inadequate and would have to be increased either to £1,100 million or some other figure. That is the justification for this Amendment, which I sincerely hope we shall carry to a Division.

The Government have only themselves to blame, for having brought us into this muddled state of Parliamentary business. We have done our best to extricate them from it by suggesting that the order of business should be reversed, and that the debate on this Bill should be adjourned until we know what decision Parliament has come to on the Expirine Laws Continuance Bill. There has been no satisfactory answer to my right hon Friend's arguments, and I hope that we shall express our views of the Government's conduct in the Division Lobby.

Mr. Pannell

I hope that I shall be in order in discussing the conditions under which this money shall be borrowed during the next 12 months. It seems to me that the relevant consideration here, when we are fixing a global sum, is the conditions and attractions that the Public Works Loan Board offer to local authorities. Subject to your guidance, Sir Charles, I intend to say a few words on the subject I touched on in the Second Reading debate.

The Chairman

I do not think that it would be in order. The Amendment is to leave out one sum and to insert another. The arguments must be for or against that Amendment.

Mr. Pannell

I am in a difficulty. I have argued before that the terms laid down by the Public Works Loan Board under the Treasury Minute sound flexible but are not made attractive to the local authorities.

The Chairman

That may be so, but it does not arise on this Amendment.

Mr. Pannell

I think that it arises in this way. We are putting in a higher sum than the sum mentioned in the Bill because of that degree of flexibility, and I am trying to help the Government by suggesting that it should put in a bit more flexibility, and that we should be able to jog along on the smaller figure. I should have thought that that was in order when we were discussing the two figures.

The present practice in lending this money is that, if the money is borrowed by a local authority for buying a fleet of lorries, it is borrowed for a period of seven or 10 years, which is the normal period for the maturity of the loan for that sort of thing. Borrowing for housing is usually for a period of 60 years. The point which the local authorities make is that if they are borrowing for housing, at the present time, when the market rate is high, they have to borrow on a basis of 60 years, and that they should be allowed to borrow for lesser periods from the Public Works Loan Board.

I protested about that in the Second Reading debate. There are a number of aspects to this matter, and the local authorities generally believe that they ought to be in a position to terminate a loan at any time within a reasonable period. Even if they do take out a 60 years' loan from the Public Works Loan Board for housing, when balances accrue to the local authorities they should be in a position to pay off that amount. It is fantastic to suggest that this money should be unloaded on the market when interest rates are high and that it should have to be maintained by the local authority over all that period.

At a time when money was cheap, there was an attraction for the local authorities. At the present time, the rates of interest up to seven years are 3¾ per cent., from seven to 15 years 4 per cent., and over 15 years 4¼ per cent. I admit straight away that for long-term money the local authorities cannot better these figures. I think that it would be of considerable advantage to the rates if local authorities were allowed a break clause in the maturity of the loan, and were enabled to borrow on lesser terms which might result in a saving of public money.

We seem to look on the local authorities, not as partners in these financial operations, using public money, but as if they were a form of private enterprise. This is all public money which has to be raised by the taxpayers or ratepayers. One of the arguments for going to the Public Works Loan Board is that this money is raised by taxation, and in fact the local authority has to pay rent on it. I hope that I am in order in saying that the Treasury ought to face this problem in a more moderate way to the advantage of the local authorities.

We cannot consider this sort of thing in isolation. I am not going into the question of the considerations mentioned by some of my hon. Friends as to the motives behind this. The Financial Secretary, in winding up on the Second Reading debate, seemed to suggest that the House had suffered from two things, that some people had exaggerated too much, and that other people had minimised the effect of what was likely to happen. I referred in that debate to the contrary Press reports in the financial papers as to the reason behind this policy.

The Financial Secretary suggested, I think, that the large local authorities should float their own loans in their own local districts. I should have thought that it would be an advantage for us to consider whether these break clauses could be put in the contracts for all loans issued by the Public Works Loan Board. There is no question that the strongest charge which can be brought against the Treasury and the Public Works Loan Board is that this is a rigid form of borrowing which does not match up to modern needs. I hope that we will have a statement from the Financial Secretary to the effect that he will meet the local authorities on this matter.

Amendment negatived.

Clause ordered to stand part of the Bill.