Clause 3.—(DEBT NOT TO BE RECKONED AMONG ASSETS OF LOCAL LOANS FUND.) (Hansard, 19 November 1952)

§ Mr. Jay
I should like to take the opportunity to ask the Financial Secretary one or two further questions about the loan on account of the housing at Kenfig Hill, which was touched upon in the Second Reading debate.
This is a remarkable story. I am asking now whether we may be given some more detailed explanation about this matter. These houses were built from 1921 to 1924. We learn from the observations on page 2 of the Bill that in 1928 about 70 houses were still vacant, and that it was not until the war occurred that it was possible for the houses to be sold. I do not propose to deal with the state of deprivation of property which prevailed in South Wales at that time. I should like, however, as this is such a very remarkable story, to ask why, even in those conditions, a hundred or so houses stood vacant for 10 years or more, and whether there is some further explanation.
Was it that the finance available for these houses was raised at such a high rate of interest that it was impossible for the houses to be let? Was it that some mistake was made in spending the money, or was it that the costs were too high, or that insufficient care was taken to ensure that the houses were put up at rents which could reasonably be paid? I think that we are entitled to know this before we write off such a large sum of money.

§ Mr. Boyd-Carpenter
I cannot add very much to this matter, apart from the very clear statement of the case which is written inside the cover of the Bill. The facts of the matter appear quite clearly. In the circumstances of the investigations that were made subsequently by the Board, which involved, as the right hon. 1934 Gentleman will have observed, the Board taking over the enterprise, it became apparent to the Board that this amount, some £39,000 out of a total investment of £141,000, would not be recoverable.
I stress two things. First, the right hon. Gentleman had great fun over this on Second Reading. He sought, with his habitual agility, to attach to this story his own view of the history of the years between the wars. He only omitted from it the fact, which appears in the statement, that there was a reduction in the rents in 1928, and that even in the years 1929–31 which I assume he would think were not too bad years, the premises were not able to be let.

§ Mr. Jay
They were reduced in 1928

§ Mr. Boyd-Carpenter
Exactly, the rents were reduced in 1928 as is apparent from the account set out in the Bill, but notwithstanding that, the houses remained unlet in the subsequent years. I hope the right hon. Gentleman will reflect on that.

§ Mr. Mitchison
I do not quite understand this argument. Looking at the description, the whole of the difficulty appears to have been caused by serious unemployment in the district beginning, I think, in 1924 or thereabouts. That is the reason for all this trouble. What is the point that the hon. Gentleman is trying to make?

§ Mr. Boyd-Carpenter
The hon. and learned Gentleman has most accurately stated half the case, but he will appreciate that the story, though it may have begun in 1924, did not result in any amelioration in the years that followed and particularly in the two years to which I have referred. But I merely say that because the right hon. Member for Battersea, North (Mr. Jay) had, I thought, some fun on Second Reading. No one would wish to deny him his fun, but perhaps the full picture is of greater value for the record than the very agreeable half-tint which he gave us.

Mr. Glenvil Hall
As the hon. Gentleman is so anxious to get the record right, perhaps I should point out to him and the Committee that, although it is true that in 1928 when a Conservative Government were in power 70 houses were vacant and the rents had to be reduced, the description goes on to say that, as a result of 1935 that, not all the houses remained empty, but that not all of them were let, so that some must have been let between 1929 and 1931.

§ Mr. Boyd-Carpenter
But even at lower rents than had obtained up to 1928 it was not possible in 1929 to let some of the property. I do not propose to go further with that; I was only adding a little light and shade to the picture drawn by the right hon. Member for Battersea. North.
As regards the practical aspects of this matter, there is, as the Committee are aware, a procedure laid down under the statutes quoted for deeming that advances by the Board become for one reason or another irrecoverable in whole or in part. The Board makes the recommendation and it has, I understand, been the practice of successive Governments to take the view that this is a matter which the Board with all its experience is perfectly competent to do. Therefore, we are putting forward as a recommendation of the Board that this sum be written off the assets of the Board. That is Clause 3 which we are now discussing.
As the Committee will observe, when we come to the following Clause we also suggest at the next stage writing it off as an asset of the Exchequer. It is simply a matter of accountancy. The records of the Board will be tidier and more accurate if this loss is written off by this Clause, and equally by the following Clause the records of the Exchequer will also be more accurate.
I do not think, in view of the recommendations of the Board and the time which has been given in which to watch this matter, that the Committee can entertain any hope that whatever they do will get the money back. It is, therefore, purely a matter of accountancy, and I think that with our knowledge—which I am sure both right hon. Gentlemen opposite possess—of the efficient way in which the Board discharges its duty in this direction, it is right and proper to accept their request and to write off their liability. This is not a matter of very great importance; it is, as I have said, simply a matter of accurate and efficient accounting.

§ Mr. Houghton
One of the most engaging characteristics of the Financial Secretary is his satisfaction with himself. When he ought to show some sense of shame he becomes even more exuberant, and, if I may say so, just a little more conceited. Surely, here is an echo of the sordid past of right hon. and hon. Members opposite. Here, surely, is an occasion when right hon. and hon. Members opposite would wish the past to bury its dead, but here it comes gaping up again for people to see what life was like in South Wales in the years between the wars.
The Financial Secretary accused my right hon. Friend the Member for Battersea, North (Mr. Jay) of making fun of it during the Second Reading debate. There was no fun then, and there is certainly no fun to be got out of it now. But the hon. Gentleman is so anxious to fix the responsibility on anybody but himself and his friends that he makes play of the fact that the loan was advanced during the years 1921–24 which just takes us to the period of the first Labour Government. That being so, the hon. Gentleman thinks he can shuffle some of this responsibility, which was that of past Coalition and Conservative Governments, on to the first Labour Government.
In the course of his remarks, the hon. Gentleman said that even though the rents were reduced in 1928 it was impossible to let some of the property. The insinuation is that 1928 was so close to 1929, when the second Labour Government came into power, that some of the responsibility must be placed on that Administration. All this I find very contemptible. This is a very unhappy story and is something on which the young people of today can reflect. In 1928, out of 170 houses, 70 were vacant. That seems almost unbelievable in these days when there is not a house to let anywhere, not even in South Wales.
My hon. and learned Friend the Member for Kettering (Mr. Mitchison) drew attention to the fact that it was serious unemployment in the district that made it impossible to obtain these economic rents. There is no doubt that we are not going to get the money back and that we shall have to go through the formality of sweeping away this last remaining wreckage of those years. But I think that the Financial Secretary might at least have expressed some regret for 1937 the unhappy social and industrial conditions under which these losses were incurred instead of making, as I thought he did, a little fun out of the matter himself and instead of trying in a most offensive way to fix the responsibility on the Labour Government who certainly had nothing to do with creating the difficulties out of which this unhappy episode arose.

§ Mr. E. Fletcher
I wish to add a word on this subject for the purposes of the record because, after all, I am partly responsible for the recommendation that these sums should be remitted. I do not think there is any doubt whatever that that is the right course to adopt, but I cannot agree with the Financial Secretary that this is a mere matter of accountancy. After all, we are writing off a sum of £39,940, and I think it right that we should draw whatever moral can properly be drawn from this unhappy story before Parliament exercises its sanction which is necessary to enable the Commissioners to write off this sum.
My right hon. Friend the Member for Battersea, North (Mr. Jay) spoke more truly than he knew when he asked whether the real reason for this trouble was the fact that the original loan was granted at an unduly high rate of interest. The Financial Secretary did not deal with that point, and I think that as it is such a large sum of money the Committee ought to be acquainted with the facts. The facts were set out in the Report of the Public Works Loan Board for the year 1927, which was long before I was appointed a Commissioner. It said: Kenfig Homes, Limited, is a public utility society formed in June, 1920, for the purpose of erecting houses at Kenfig Hill, Penybont, Glamorgan, for occupation by miners employed at the Kenfig Collieries of Messrs. Baldwin's, Ltd. As far as we know, the sum of £140,590 was lent, and the rate of interest, which is relevant on this issue and is, indeed, the item that is most relevant, was 6½ per cent.
I made some inquiries into the matter and I found that this loan was made by the Commissioners of that time to this public utility society formed by Messrs. Baldwin's, Limited, at the request and instigation of the Ministry of Health and the Board of Trade. Owing to the excessively high rate of interest charged, it 1938 follows that very high rents had to be fixed for the 170 houses that were built by Kenfig Homes, Limited.
A few years later interest rates fell and the local authority, namely, the Penybont Rural District Council, thought they would set about erecting houses on sites belonging to them, and because they were able to borrow at a lower rate of interest they were able to build almost identical houses at a lower rent. The result was that these Penybont Rural District Council houses were built and the tenants of Kenfig evacuated the 170 houses built by Kenfig Homes, Limited, and went across the road to live in the houses built by the rural district council at much lower rents.
The result of that was that the Kenfig houses became empty and could not be let. Therefore, eventually the Public Works Loan Commissioners, in pursuance of their statutory duty and as subsequently approved by Parliament, appointed a receiver, who had to do his best to let the houses at lower rents, eventually selling them to repay as much as he could of the loan.
It is quite obvious from the recital of the relevant facts that no blame attaches to the Public Works Loan Commissioners at any stage of this sorry recital, but the moral is that loans ought not to be made at excessive rates of interest over long periods, whether for housing or other social purposes. If loans for housing purposes are lent at 6½ per cent. or even at lower rates of interest, this is the kind of difficulty that one gets into, and it is for those reasons, and faced with this unhappy story that we have tried previously this year and last year, whenever the occasion arose, to protest against this mistaken and evil policy of making local authorities pay an unduly high rate of interest for the loans they require for housing and other social purposes.
This is a very grim picture of what happens when there are excessive rates of interest charged either by local authorities or by utility companies for putting up houses. Once the loan has been borrowed at an inflated rate of interest, as we heard last week and as we shall hear at a later stage, the borrower has to repay it over 50 or 60 years. He cannot escape that liability, and this excessive rate of interest goes on all the time, even though interest rates subsequently fall.
1939 That is precisely what we have been protesting about and this is what leads to trouble. Here was a glaring case. I do not blame the Penybont Rural District Council for putting up dwellings for the inhabitants of their area, who are nearly all colliery or ex-colliery workers or the widows of colliery workers, but the result of putting up those houses which could be let at lower rents was that the houses built out of the loan at 6½ per cent. fell empty. Now Parliament has to sanction the writing off of nearly £40,000.