HC Deb 19 July 1955 vol 544 cc184-6
10. Mr. Woodburn

asked the Chancellor of the Exchequer the total repayment, including interest, made to the Public Works Loan Board at the end of a 60-year loan; how much of that is required to pay the costs of administration; and how much is recovered by the Treasury.

Mr. R. A. Butler

At the current rate of interest the total amount repayable to the Board in respect of a loan of £100 for sixty years is £277 10s. No part of this sum is used to pay the costs of administration. The whole amount is paid into the Exchequer and is used to meet the cost of the National Debt, which has, of course, been increased by the amount of the Board's loan.

Mr. Woodburn

Is the Chancellor aware that local authorities regard it as somewhat cockeyed finance to overcharge them, then to give them subsidies to pay the overcharge, and then for the Treasury to make a profit out of the interest?

Mr. Butler

I do not accept the picture as detailed by the right hon. Gentleman.

Mr. Woodburn

If the right hon. Gentleman is overcharging local authorities by way of interest on loans advanced in order to build houses—which, we understand, the Government want to encourage—and these amounts have to be charged to the rents in an unnecessary fashion, does not it strike him that it is a little upsetting for local authorities to find themselves involved in this kind of finance?

Mr. Butler

The amount of interest may appear to the right hon. Gentleman and to the House to be large, but it should be remembered that during the early years of the loan very little capital is repaid under the annuity method, so that a large part of the principal sum is outstanding for a fairly long period.

12. Mr. Woodburn

asked the Chancellor of the Exchequer the approximate management costs, per £100, of loans on housing from the Public Works Loan Board; to what extent such cost is taken into account in determining the interest charged on such loans; and whether any profit or surplus results to the Public Works Loan Board.

Mr. R. A. Butler

The management cost per £100 of loans made by the Public Works Loan Board is approximately 4s. An initial fee is charged for this, and no account is taken of it in determining the rate of interest. No profit or surplus results to the Board.

Mr. Woodburn

Am I to understand from the answer to the previous Question that the profit or surplus goes direct to the Treasury? Is there any reason why the Government should make a profit between different Departments of their own organisation?

Mr. Butler

As I said in reply to Question No. 10, the National Debt has been increased by the amount of the Board's loan. I therefore think it not unreasonable that this very small financial transaction should be handled in the manner suggested.

Mr. Woodburn

I am glad of that explanation. Is this all that is taken to repay the principal, or is not that £277 considerably more than is necessary to repay the principal? What happens to the other £177?

Mr. Butler

I explained the reasons for the size of the interest in reply to Question No. 10. I am now asked a specific question about the costs of administration. I cannot add to my previous reply.