HC Deb 07 March 1955 vol 538 cc77-112

5.41 p.m.

Mr. Glenvil Hall (Colne Valley)

I beg to move, in page 2, line 3, to leave out "one thousand" and to insert "twelve hundred."

The Bill provides for advances to local authorities up to £500 million. The Public Works Loan Commissioners can also promise to local authorities an additonal £500 million, making £1,000 million in all. The effect of the Amendment is to increase the sum which the Commissioners can promise by a further £200 million, making £1,200 million.

I assure the Financial Secretary to the Treasury that we do not move the Amendment in any captious spirit. We are not here simply to obstruct. We welcome the Bill, and the sooner it reaches the Statute Book the better. We do not want to see the sum allocated so large that a Measure similar to the Bill will not be wanted for some time. It is an excellent thing, whatever Government be in office, that at least once a year Parliament should have an opportunity of reviewing the financial position between local authorities and the Exchequer.

In putting forward the Amendment the Opposition seek no party advantage, and have none to gain. We are genuinely apprehensive that the sum allocated will not be enough. The Bill was ordered to be printed on 16th February last. There can be little doubt, therefore, that the sum mentioned in it was decided upon by the Treasury before that date, and certainly before the Government, by their muddle and mismanagement, had to raise the Bank Rate to a height not reached during the past twenty years.

It is possible that the Government considered whether to withdraw the Bill. Perhaps the Financial Secretary will tell us about that. Anyway, the Government obviously decided to let it go and to hope for the best, particularly in the light of their declared policy of letting local authorities battle for credit on the open market. It means that when the Chancellor of the Exchequer opens his Budget he will not have to make so large a pro vision as he otherwise might have had to do for below-the-line borrowing.

5.45 p.m.

The Financial Secretary told us a week ago that, during February, £49 million had been advanced. That works out at an average of £12 million a week. The chances are that the moneys advanced in the final week, when it was certain that the Bank Rate was about to go up, were a good deal larger than the monthly average. It is clear that, up to 25th February, £413 million of the £500 million at present authorised had gone. Before the Bill becomes law the whole £500 million may have been absorbed. We should be told whether that is so. Whether much or little of the £500 million be left by the time the Bill receives the Royal Assent, it is obvious that the amount promised must now have become larger than the £519 million which the Financial Secretary, when he spoke on the Second Reading, assured us had been promised by 19th February. I think that was the date he gave us.

Undoubtedly, the £500 million for actual advances has practically disappeared, and more than the £519 million must now have gone byway of promises to local authorities. If £500 million had been inserted in the 1953 Bill the Government would now be in rather a mess. That £500 million would have gone in promises, or else certain local authorities would have had to be refused during the last few weeks. We do not want that to happen again, and I am sure that the Financial Secretary does not want to see it happen.

By this Amendment we come to the aid of the Government to assist them to make the Bill a tidy Measure. In the last weeks we have frequently complained that there was no tea, no planes, no this, or no that. We do not want the Financial Secretary to tell us later that there is no money for the Public Works Loan Commissioners. The £500 million which is to be at the command of the Commissioners for promises to local authorities is already more than half hypothecated. Taking the two sums together, totalling £1,000 million, more than half has been promised to local authorities.

The hon. Gentleman may tell us, when he replies to the debate, that a Bill of this kind can be introduced at any time, and that if the Government find them selves running short they can always ask the House to pass another Bill. That argument, however, is not altogether valid. I do not know when the General Election is coming, but if it comes in October or November it will come at the time when the present amounts allocated under the Bill may be beginning to run out. It is better for the Government to be safe than sorry. So I repeat that this Amendment is not moved in any spirit of obstruction. We are simply trying to point out to the Government that it is absurd to think that the £1,000 million mentioned in the Clause will necessarily be enough.

We think they must have forgotten their own policy, which has been adumbrated from that Box time and again during the last month or six weeks. Minister after Minister has told us that the Government are to go in for all sorts of schemes for bigger and better roads, bigger and better water and sewerage schemes, more schools, and a further drive for housing. We are also told that the local authorities will have to rehouse people under the Requisitioned Houses and Housing (Amendment) Bill, which is at present in Committee.

The Government, by an Amendment they themselves have brought forward, are pressing the local authorities to make grants for improvements under the 1949 Act. All this means that the local authorities will have to embark on larger schemes of capital expenditure than they have recently. The majority of them, as the Financial Secretary knows, will have to go to the Commissioners for funds for those schemes. Therefore, it is essential that the Board should have ample funds at its command.

When we were discussing this matter last Monday we on this side tried to persuade the Financial Secretary to give us some indication why the Board's rate for loans of over fifteen years has gone up only to 4 per cent, although the Bank Rate has gone up to 4½ per cent. In 1952, when the Bank Rate was 4 per cent., the Board's rate went up to 41/4 per cent. Then the Government, under pressure, increased the housing subsidy. Now, as from the first of this month, they have decreased it. There is every reason, in our view, for the Government to consider this again, and to increase the subsidy to meet the vastly increased expenditure that will now fall on the local authorities.

The question I should like to put to the Financial Secretary is this: is the real reason for increasing the Board's rate now only to 4 per cent, and not 41/4 percent, that the Government feel they would then have to do what they did before, namely, to increase the housing subsidy when the Board's rate went up to 41/4 per cent.? Is that why the Board's rate is kept to 4 per cent, now? We do not object to a rate of only 4 per cent.. but some of us have fears that presently the Government may raise it. We like a low rate for the Board's loans because it does assist local authorities, but, if the rate is kept as it is—and we want it to be kept as it is, and as quickly as possible lowered—

The Chairman

Order. I think that the right hon. Gentleman is going beyond the Amendment.

Mr. Glenvil Hall

I was coming at that moment to the point I wanted to make, Sir Charles. The rest was only preliminary to my point, which, I think, is a reasonable one to make in a debate on this Amendment.

I was about to ask, as the rate fixed is only 4 per cent, while the Bank Rate has gone up to 4½ per cent., if that is not an additional reason to suppose that the local authorities will seek more and more to obtain their loans from the Board? If many of them do that, as some of them have recently done, will that not indicate that the amount allocated is not sufficient?

It seems obvious to us, therefore, look at it how we will, that the £1,000 million mentioned in the Clause for advances and commitments is not enough and should be increased. This is, after all, only an enabling Bill. We are not voting this money. It will not necessarily be spent. There are safeguards. No local authority can get a loan unless it has the blessing of the Government Department concerned. In our view, we are not here inviting local authorities to spend more than they should. There are, as I say. safeguards, and these can be implemented at any time. Therefore, as we see it, no harm can be done by increasing the specified amount from £1,000 million to £1,200 million. On the contrary, the in crease will give a certain amount of elbow room to the Government and also to the Board, which the Board ought to have. I have, therefore, utmost confidence that the Financial Secretary will accept the Amendment, and accept it gladly. We are out to help the Government on this occasion, and I am sure that the hon. Gentleman will see that it is so.

Mr. Gerald Nabarro (Kidderminster)

The arguments of the right hon. Gentle man the Member for Colne Valley (Mr. Glenvil Hall) might be considered more valid if all the local authorities were obliged to have recourse to the Public Works Loan Board for any borrowing that they seek to achieve. What the right hon. Gentleman has omitted to state in his most interesting exposition of the position is the fact that only slightly more than one-half of the global sum which has been borrowed by local authorities in the passage of the last two years has been borrowed from the Board. About £300 million a year has been borrowed in each of the last two years by the local authorities from the Board. Does the right hon. Gentleman disagree?

Mr. Glenvil Hall

The hon. Gentleman says £300 million. Up to some date in February, the Financial Secretary told us last Monday, at least £343 million—

Mr. Charles Pannell (Leeds, West)

£364 million.

Mr. Glenvil Hall

—£364 million had gone, and I am sure that much more than that has been spent since.

Mr. Nabarro

I said, very distinctly and clearly, that £300 million a year is the level of borrowing by local authorities from the Board. I am sure the right hon. Gentleman will not wish to contradict what the Financial Secretary said on Second Reading: … local authorities are raising sums of about £300 million a year from the Public Works Loan Board."—[Official Report, 28th February, 1955; Vol. 537, c. 1803.] That figure represents only slightly more than half of the total borrowing of the local authorities. In addition to that £300 million per annum, they are borrowing £20 million a year on the money market, or they have borrowed approximately that sum in each of the last two years. They are also borrowing approximately £40 million a year from the Trustee Savings Banks, and they borrowed approximately that sum in each of the last two years.

Further, local authorities are borrowing approximately £200 million a year by private mortgage. Thus the total of the borrowing by local authorities from the Board, which in aggregate approximated to a sum of £300 million per annum in each of the last two years, compares with their aggregate borrowing from sources other than the Board of £260 million per annum in each of the last two years. Therefore, it follows that the total borrowing of local authorities from the Public Works Loan Board with which we are primarily concerned in this Bill is in total only slightly more than 50 per cent, of all the local authority borrowing.

6.0 p.m.

I have been a constant advocate of a policy of encouraging local authorities to go to the open money market for their money rather than to the Public Works Loan Board. My intervention in this debate today on the Amendment is simply for this reason, that as a balance of only slightly more than 50 per cent, of the money which local authorities require is borrowed from the Board, the remainder being borrowed from what I may call, in generic terms, private sources, it is manifestly impossible to estimate precisely when the additional powers granted to the Public Works Loan Board under a Bill of this kind will run out and when it will be necessary for the Treasury again to come to the House and seek further borrowing powers for the Board.

It may be a matter of fifteen months, eighteen months or two years, for every thing would depend upon the extent of the recourse of the local authorities to private money sources as opposed to the Public Works Loan Board. I believe, from the general financial situation today, that if the powers in this Bill, instead of being £1,200 million which the right hon. Member for Colne Valley wants, were to remain at £1,000 million, then they would not be exhausted sooner than a date fifteen months hence or longer than a date twenty-one months hence. In view of the general conditions of the money market, it must be approximately fifteen to twenty - one months,or, say, eighteen months hence.

I am sure the right hon. Gentleman will not quarrel with me when I say that, in view of the magnitude of these financial transactions, it is desirable in the interests of good parliamentary government and good local government that we should have an opportunity, every eighteen months, to discuss the affairs of the Public Works Loan Board, and that the sum of money voted in total should conduce towards our being able to review the position not more than eighteen months hence. In fact, that would be the situation if the total in this Bill remained at £1,000 million. If it were put up to £1,200 mil lion it is possible that the period, according to the arrangements which are apparently being made, would be extended as far forward as two years, which I think would be a great mistake.

Mr. Glenvil Hall

The hon. Gentleman missed my argument. I am not quarrel ling with that; it is possibly due to the way I put it. But, shortly, the point is this. On the showing of the Financial Secretary, on 19th February no less a sum than £519 million had been promised to local authorities. We were told that those were moneys which undoubtedly would be taken up because the Board had taken steps to clear its books of applications which were not likely to mature. There fore, we could take it that about three weeks ago £513 million had actually been asked for by the local authorities and not taken up. That is more than half of the £1,000 million which is in the Bill.

Mr. Nabarro

The right hon. Gentle man is quite right on his figure of £513million—

Lieut.-Colonel Marcus Lipton (Brixton)

It should be £413 million.

Mr. Genvil Hall

No; £413 million, as I understood the Financial Secretary, has already been paid out. In addition to that, there are commitments, and the commitments he mentioned, I think, were £519, not £513, million.

Mr. Nabarro

Perhaps I may be for given if I intervene for one moment. There are, of course, contra items, if I may express myself in simple terms, and the most important of the contra items is £170 million of commitments which have been cancelled. The Financial Secretary on 28th February said: Since that date"— that is, 31st March, 1954— I understand that about £170 million of commitments have been cancelled on evidence that local authorities had no desire to take them up."—[Official Report, 28th February, 1955; Vol. 537, c. 1799.] The critical point in deciding how much ought to be provided for in total in this Bill is the average rate of lending by the Board—because it governs the frequency at which Parliament can review the activities of the Public Works Loan Board—and that average rate of lending is about £300 million. At the present rate of lending it will last for something between 15 months at a minimum and 21 months at a maximum. I believe that that is approximately the correct length of time, based upon the £1,000 million total borrowing powers that we are giving the Board under this Bill in the event of this Amendment not being carried.

Accordingly, I arrive at the conclusion that it would be a mistake to advance the amount of £1,000 million to £1,200 million, and, although the right hon. Gentleman moved his Amendment in the most courteous and lucid terms, I still think that we would be well advised to stick to the original terms of the Bill and not seek to enlarge the global amount which is therein provided.

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

The hon. Member for Kidderminster (Mr. Nabarro) is likely to mislead the Committee by some of his remarks this evening, for this reason. Although it may appear that if local authorities continue borrowing from the Public Works Loan Board at the rate at which they have been borrowing in the last two years, the consequences may be roughly as he suggests, there is some evidence that local authorities during the last three or four months have been borrowing increasingly from the Board, not only on account of expectation of movements of interest rates but also because the Board's regulations have been so altered as to make the borrowing arrangements a great deal more attractive to local authorities.

For example, it is now possible, and has been for the last three or four months in certain cases, for local authorities to borrow for housing purposes on medium term from the Public Works Loan Board instead of being obliged to borrow for the whole period of the life of the assets—the houses—for sixty or eighty years as was at one time necessary. Many local authorities, including my own in New castle, have recently moved from the open market back to the Public Works Loan Board for that very reason, because they are now borrowing for 15-year periods for housing purposes.

That tendency which has just started—because the change was quite recent—seems to me to be likely to attract a good deal more borrowing from the Public Works Loan Board in the future. As my right hon. Friend the Member for Colne Valley (Mr. Glenvil Hall) has suggested, it seems also that because of certain discrepancies between the Public Works Loan Board rate of interest and the market rate which is likely now to become stabilised, there will be greater attractions possibly on balance to borrow from the Public Works Loan Board.

Therefore, on both these counts 1 suggest that it may well be found that some figure—no one can estimate exactly, but certainly a good deal of that sum that has been borrowed in the open market in one way or another—may very well now come back to the Public Works Loan Board. I suggest that that is a very strong argument why this Amendment should be accepted.

It seems to me, too, that the only justification that the Financial Secretary to the Treasury can put forward for thinking that the borrowing may be rather lower than in the past would be if the Chancellor himself were to take further specific measures to try to damp down all local authority borrowing. This, of course, is what we suspect. It seems to me that the only justification which the Financial Secretary can put forward for rejecting the Amendment is for him to say, "We are determined to circumscribe severely local authority borrowing. We are determined to hold it back." That is, in fact, our main criticism of the Government's proposals.

The Financial Secretary must say one thing or the other. Either he must say that he believes that local authorities will be reasonably free to borrow and that he expects them to borrow at any rate up to the present total level of local authority borrowing—in which case he must accept the Amendment; or, on the other hand, if he rejects the Amendment and keeps to the lower figure, it seems to me that he must confess that the Government intend to reduce the total level of local authority operations.

I suggest to my hon. Friends that this is a serious matter. As my right hon. Friend said, we have been treated, both in the House and in Committee, to a series of declarations of Government intentions on local government and other plans of development. If these plans are to come to fruition, then clearly they will demand the borrowing of very large sums; and one would expect a good deal of that borrowing to start within the period of the currency of the Bill.

But the action which the Financial Secretary is taking suggests that these great proposals are not to be brought into operation but are either to be postponed or not to be operated at all. It seems extraordinary at one and the same time to announce to the House great schemes of development in roads, in education, in housing and the rest, and to take action about interest rates which, if it means anything at all, must mean a desire on the part of the Government to hold back in vestment and development.

I therefore suggest that the Financial Secretary has a good deal of explaining to do if he does not accept the Amendment. I very much hope that he will find it possible to accept the Amendment. I do not see how it would inconvenience the Government. It does not enforce higher spending and, as my right hon. Friend said, it certainly gives more elbow-room to the Commissioners. I cannot see what objection the hon. Member can take to it and I very much hope that he will accept it.

It will be understood that, since we last discussed these questions, all on this side of the Committee have been very impressed by the announcement of the Governnment's intentions on housing subsidies. That, again, tended to suggest that the Government mean to hold back development. It is another factor which tends to make housing operations more expensive and therefore to discourage local authorities from carrying out their full programmes. That is what we suspect is in the back of the hon. Member's mind. If he wants to dispel these doubts, he should take the simple line of accepting the Amendment so ably moved by my right hon. Friend.

6.15 p.m.

Lieut.-Coloned Lipton

I am happy to say that my name is associated with those of my right hon. Friends in putting this Amendment forward for consideration by the Committee.

It is unfortunate that the hon. Member for Kidderminster (Mr. Nabarro), who made an eloquent speech a few moments ago, is not in the Committee, because I want to refer to one or two matters which he mentioned. As he is not here, I shall not waste the Committee's time by dealing with the arguments of an hon. Member who put them forward and then apparently ran away before he could hear the proper answers to them.

For some reason or another, the hon. Member laboured under the pathetic illusion that local authorities were borrowing only £300 million a year from the Public Works Loan Board. That is flatly contradicted by what the Financial Secretary told the House on Second Reading. It is true that in a later stage of his speech the Financial Secretary said something about £300 million. By that time he may have forgotten what he said earlier, for he had made it clear that during the month of February—not the whole month, either—local authority borrowing reached the sum of £49 million. If local authority borrowing is to proceed at that rate it means that authorities will borrow about £600 million a year, which is twice the figure on which the hon. Member for Kidderminster based almost the whole of his argument.

It is interesting to note that in 1951, when, for the first time since the war, the present Administration introduced a Public Works Loans Bill, the Government held it necessary to increase the overall total from £850 million to £950 million. In this Bill we are asked to agree to a total of £1,000 million. If, in the opinion of the Government, £950 million were just sufficient in 1951, then, in my view, it would be wrong to base next year's working on a total of £1,000 million.

The Financial Secretary is aware that there has been a considerable fall in the value of money since 1951, when £950 million was considered adequate for the Board's overall commitments. According to an answer given by the Chancellor of the Exchequer in the House on 4th March, the £ was worth 17s. 8d. in January, 1955, compared with 20s. in 1951. If the Government suggest that £500 million is sufficient to cover local authority borrowing in the forthcoming twelve months, let us remember that £500 million, as at October, 1951, is worth only £441 million now.

What it means is that, compared with October, 1951, the Government are either hoping for or basing their calculations on a substantial cut in local authority expenditure. That is a point which was made by my hon. Friend the Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop). My hon. Friend was perhaps a little unjust in seeking to ascribe to the Financial Secretary the intention of cutting down local government expenditure, for he may have overlooked what the Financial Secretary said on Second Reading.

During the Second Reading it was said that we on this side of the House were suspicious about the Government's intentions, and, in fairness to the Financial Secretary, I think it is right that I should quote what he said, as reported in column 1804. He was dealing with the request to indicate how long the Measure would last and said: It is impossible for me to do so. In my opening speech I said it would depend entirely on how rapidly and how heavily local authorities wished to borrow. I did not say how slowly or how lightly. I have conveyed no suggestion, nor have I any desire to convey the suggestion, that this Bill is a warning to local authorities not to pursue a borrowing policy."—[OFFICIAL REPORT, 28th February, 1955; Vol. 537, c. 1804.] That, of course, does happen to coincide with what the hon. Member for Kidderminster said, but that does not matter.

Let us consider the implications of the argument of the Financial Secretary. It is that progressive local authorities, desiring to serve the communities in which they operate, because of rising prices will be compelled to incur greater expenditure in the provision of social services for which they are responsible. If it is the desire of the Financial Secretary, speaking officially on behalf of the Government, not in any way to discourage local authorities from borrowing money for suitable purposes, it will be quite clear that the money for which he is asking in this Bill will not be adequate.

I was reading in the newspaper today that building workers are to put in for an increase of 4d. an hour. That undoubtedly will add to building costs. It will mean that local authorities will have to borrow more money in future for carrying out housing operations than they have had to borrow for comparable work in the past.

Another factor which I should like the Financial Secretary to consider is that as the number of sites available for housing in the London County Council area grows more limited, the purchase of sites becomes a more costly proposition. In the Metropolitan Borough of Lambeth in connection with a recent housing scheme we had to pay as much as £30,000 an acre. I see no prospect whatever of site values diminishing in London for some considerable time. That means that local authorities desirous of continuing to provide houses—quite apart from impending cuts in the subsidy and that sort of thing—will have to incur very much heavier capital liabilities in respect of sites acquisition. The Financial Secretary and the Government hold out the prospect of more schools and roads being provided in the imminent future. That will mean further borrowing on the part of local authorities.

The point made by my right hon. Friend the Member for Colne Valley (Mr. Glenvil Hall) was completely ignored by the hon. Member for Kidderminster, who attaches so much importance to the private money market. The situation seems quite simple. If the Bank Rate is 4| per cent, and money can be obtained from the Public Works Loan Board at 4 per cent., why should local authorities go to the open market? The answer is obvious to me and it reinforces the argument that the tendency of local authorities to borrow from the Public Works Loan Board will increase instead of diminishing.

The Financial Secretary held out the prospect that by getting rid of commitments which are moribund total commitments would be reduced, but he was not able to tell the House on Second Reading to what extent those moribund commitments would be wiped out and to what extent that would provide a greater margin within which the Public Works Loan Board would operate. Without that information it is quite impossible accurately to assess how much value can be attached to the possibility of a substantial reduction in commitments by getting rid of moribund commitments. In any event, those moribund commitments are likely to be replaced by an even greater amount of local authority borrowing in the next year or two.

For these reasons 1 hope that the very reasonable case put forward by my right hon. Friend will be accepted by the Government. It cannot be their desire to go out of their way to dissuade local authorities—

Mr. Blenkinsop

My hon. and gallant Friend was kind enough to put me right on one point; perhaps I might put him right a little on this point. I think there was a reference to £170 million which had, in fact, been cancelled as moribund. That gives some guide as to the level of moribund commitments.

Lieut-Colonel Lipton

I am obliged to my hon. Friend.

The Financial Secretary will note that on this side we have no desire to mislead the Committee but are prepared to come to each other's aid in case, inadvertently, we overlook a material point. Although, as my hon. Friend pointed out, £170 million had been cancelled, that may easily be outweighed by additional borrowing which local authorities will be persuaded to make, for two reasons. One is that the rate of Public Works Loan Board is below that of the Bank Rate and the other is the apparent desire of the Government not to stand in the way of those local authorities which want to go in for borrowing for useful social services.

In my view, it cannot be the policy of the Government to dissuade local authorities from going to the Public Works Loan Board. The slight advantage in interest rates at the moment continues to make it advantageous for local authorities to borrow on long term. The history of the Public Works Loan Board in the matter of local borrowing is interesting in this connection. Out of a total net loan debt of the London County Council and the Metropolitan boroughs amounting on 31st March, 1954, to £326 million, no less than £188 million was borrowed from the Board. The Financial Secretary will note that £85 million out of the £123 million of the net loan debt of the Metropolitan boroughs was borrowed from the Board. I see no reason at all why that tendency should suddenly alter because of anything the Financial Secretary said on Second Reading.

Mr. Kenneth Thompson (Liverpool, Walton)

Would the hon. and gallant Gentleman tell the Committee how much of that total borrowed from the Board was borrowed during the time in which the authorities were compelled to go to the Board?

Lieut.-Colonel Lipton

The period during which local authorities were compelled to go to the Public Works Loan Board represents a short period in their total financial history, taking into account the years on which local authorities borrow on long term. I have given the global figures to indicate that local authorities generally, quite irrespective of party affiliation, attach very great importance to the facilities provided by the Board. I am sure they will continue to attach even greater importance to those facilities in the near future.

For these reasons I think my right hon. Friend has made out a convincing case, which, I hope, the Financial Secretary will be disposed to accept.

6.30 p.m.

Mr. James MacColl (Widnes)

I share the regret of my hon. and gallant Friend the Member for Brixton (Lieut-Colonel Lipton) that the hon. Member for Kidderminster (Mr. Nabarro) has left us. The hon. Member so often makes good speeches in the House that it is a great pity he should be under the delusion that he made a good speech this evening. He has a facility for dealing with figures which I cannot possibly hope to rival.

I do not pretend to be able to grasp all the figures which have been bandied about during these discussions, and I have not quite discovered which of my hon. Friends—my hon. and gallant Friend the Member for Brixton or my hon. Friend the Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop)—is the more "moribund"; I have given up trying to cope with all those details. But it seems to me that the Amendment raises an important question, not of detailed figures, but of simple logic.

The Government have been unable to make up their minds what they are trying to do in this Bill. One thing which they can do is to assume that their policy of keeping the interest rate of the Public Works Loan Board below that of the market will be successful, in which case obviously, as my hon. and gallant Friend and my right hon. Friend the Member for Colne Valley (Mr. Glenvil Hall) have said—although the hon. Member for Kidderminster could not grasp the point when my right hon. Friend made it—the effect will be that the more money, which up to now has been borrowed from the open market, will be borrowed from the Public Works Loan Board. Otherwise, if that were not so, there would be no point in having a different interest rate between the two.

Last year and the year before, the former Financial Secretary to the Treasury, who is now the Minister of Transport, was quite clear about his policy. His policy was to deter local authorities from going to the Public Works Loan Board and to encourage them to go to the open market in order to reduce the Government's commitments "below the line." That was a policy with which I disagreed and which I and a number of my colleagues on this side opposed, but it was a consistent and logical policy. It was a policy which one could recognise being carried out with the clarity of mind and ruthlessness of action that one would associate with the Minister of Transport.

That policy was effective. A great many local authorities did. in fact, move over to the private money market. Now. we have reached the situation that the interest rates in the open market have been raised as a result of Government policy. If the Government had then said, "We will not touch the interest rate of the Public Works Loan Board, because we recognise that now, in order to carry out our policy of expansion of the social services, it is necessary that there should be a subsidised rate of interest," I could have understood that. It would have been quite logical to leave the Public Works Loan Board rate of interest where it was, and to increase enormously the amount which is provided for in the Bill, and to carry out a consistent policy.

On the other hand, the Government might have said, "No. The statement of policy previously laid down by the Government is still our policy. We intend to link the interest rate firmly to the market rate. We want to keep local authorities in the open market." In that case, there would have been a logical and consistent case for raising the interest rate to the level of the market rate and for keeping the amount provided for in the Bill at its present figure. But how the Government can hope to do both, and which of the two things will be the most effective, is something which I find extremely puzzling.

I presume that somebody somewhere in the Government is responsible for coordinating policy. We at one time had a great many Ministers in another place who indulged in co-rdination. Presumably, one of those great co-ordinators is capable of addressing himself to the question of which of these two warring policies is to succeed.

Is local authority borrowing to go to the Public Works Loan Board, or will the raising of the rate of interest discourage all local authority borrowing in absolute terms? Which of the two will be effective? Upon the answer to that question seems to depend the answer to whether we are right in our Amendment or whether the Government are right in their original proposal.

My right hon. Friend the Member for Colne Valley was charitable towards the Government in saying that we assume that they mean what they say in stating that there is to be a great development of investment by local authorities. If that is true, if that is what the Government are providing for, our Amendment must be right. If, on the other hand, the other policy is to work, and there is to be an absolute deterrent as a result of the raising of the interest rate, the Government have a case.

Let me, however, take just one illustration of how the situation would work, as far as I have been able to understand it; and this point was made fairly by my hon. and gallant Friend the Member for Brixton. Local authorities who have been borrowing in the open market have been taking full advantage of the interest rates on short-term money. That is a policy which can be carried on for a certain length of time, but sooner or later there comes a moment when a borrower must decide to fund his loan and his capital commitments on a Long-term basis. He cannot continue for ever gambling on short-term money rates remaining below Long-term money rates. Therefore, at some stage a local authority must look round and see where it is to borrow.

The hon. Member for Kidderminster mentioned that many local authorities were borrowing from trustee savings banks. That was true, but one of the disadvantages of borrowing from trustee savings banks is that they usually demand a break clause. Therefore, one cannot borrow on long-term from trustee savings banks without running the risk that the break clause will come into operation, and the borrower then finds himself in the situation that he may have to borrow at a higher rate of interest: at some future moment, he may find himself in a difficult situation financially.

The prudent course which, I should have thought, most local authorities would be taking was, having sampled the open money market and having taken full advantage of the difference between the short-term and the long-term rates of interest while the going was good, wisely deciding now that they would invest and take full advantage of the new preferential rate which they get from the Public Works Loan Board.

If local authorities are to do that, if that is the intention of the Government—otherwise there would be no point in having kept the rate of interest for the Public Works Loan Board below that of the open market—surely there must be an increased demand for the resources available through the Public Works Loan Board.

For anybody to risk his reputation, as the hon. Member for Kidderminster did, by trotting out a lot of figures which he had learnt by heart with extraordinary skill, and producing a lot of historical data without in any way addressing him self to the problem of what the Government are trying to do, and without attempting to examine critically whether the Government will be successful in either of their two competing policies, seemed to me to be wasting the time of the Committee.

Surely, therefore, the Financial Secretary must make up his mind and tell the Committee what is going to happen. Will he succeed in keeping down local authority borrowing because the rate of interest is going up or will he find himself faced with a great number of local authorities changing their borrowing from the open market to the Public Works Loan Board as a result of the preference which is now provided for people who go to the Board?

I welcome that preference, because I want to encourage people to go to the Public Works Loan Board rather than to the open market. Therefore, I am glad that that difference has been made. I am, however, rather dismayed to find that, if the Government resist our Amendment, they must feel that that policy will not work and that they do not intend that that advantage, which one sees as a sort of repentance on the part of the Government, should work. One would be glad to know how the Government intend to keep local authority borrowing within the compass of the Bill without accepting the Amendment.

Mr. C. W. Gibson (Clapham)

I sup port the Amendment, not because I am suspicious of the Government's intentions, as outlined by my hon. Friend the Member for Widnes (Mr. MacColl), but because, in my simplicity, I accepted the vast programme of public works which was announced in the last month or so as being really intended to be carried out. Having decided that these vast schemes of road improvement, school building, housing and the provision of water supplies and sewerage constituted the kind of policy which might look very well in the shop window if there were a General Election, I should have thought that the Government might provide sufficient funds to carry the schemes on for the next year or two.

It is difficult to go into a great number of detailed figures, but one of the vast road schemes which it has been indicated will be sanctioned is the Elephant and Castle scheme. I have been trying to check what it would cost and what the L.C.C. would have to borrow to carry out the first stage of that scheme. While I have no final figures, I understand that the 16 acres required for carrying out the first stage of that vast scheme will cost about£125,000 an acre, which will include buying up some property. That kind of thing must apply to the whole country though not, of course, to the extent that it applies in London, where landlords rake off enormous profits when public improvements are to be carried out.

The Government either mean these programmes to be carried out or they do not. If the Government do not provide finance through the Public Works Loan Board which the local authorities can take up, the schemes will be damped down. It is not sufficient to say that these schemes are intended for some years ahead. Some of them are to come for ward next year. No local authority will plunge into vast schemes of this kind without certainty that the capital expenditure will be authorised and the grants to which the local authority is entitled will be paid. That means that unless we have enough money in the funds of the public Works Loan Board, inevitably and well within fifteen months more money will be required from Parliament.

The Requisitioned Houses and Housing (Amendment) Bill, which is now before a Standing Committee, will mean the expenditure of an enormous sum of money in London, where 40,000 or 50,000 houses will have to be leased or bought and where we shall be lucky if we can acquire each house for less than about £1,500, on the average. That will mean a sum of about £6 million. Although the problem with which that Bill is intended to deal is not as serious in some other towns as it is in London, the Bill does mean that the total number of loans which local authorities will have to take up will pile up.

The fact that during the last few weeks there has been a big extra demand on the Public Works Loan Board, added to the declared intention of the Government to go on with vast schemes of road improvements and the like, must mean that there will be a very big demand within the next two years, not ten years, on the Public Works Loan Board, otherwise schemes will be pushed on one side for three or four years or will not be carried out.

We on this side of the Committee have tried in the House and in Standing Committee to have the period within which houses must be derequisitioned extended to ten years but we are told by the Government that this work must be done within five years, despite the increase in capital charges, because there was some doubt whether local authorities could be relied upon to carry out the provisions of that Bill if the time were extended beyond five years.

6.45 p.m.

I am sure that the whole country agrees with the need for the vast schemes which the Government have announced. We all want to see new schools built and big road improvements schemes carried out, but none of us wants to wait for ten or twenty years before seeing them. Most of the plans are ready and we ought to be busy preparing the financial estimates so that the local authorities can make their requests for the necessary capital loans. Whether they do that through the Public Works Loan Board or in the private market is a matter for them, but it is interesting to know that the Financial Secretary has said that 75 per cent, of the loans for housing which local authorities have taken up were taken up through the Board.

Do the Government intend to go on building a vast number of houses by using the services of the local authorities, or is it part of Government policy to re duce the amount of local authority building, as the tendency now appears to be? The country is entitled to know. In any case, whoever builds the houses, the building will involve vast capital expenditure. If the Government accept the Amendment, people will be more inclined to believe that the Government really intend to carry out the big schemes which they have announced and that the schemes are not political camouflage in the windows of the Tory Party.

Mr. Scholefield Allen (Crewe)

As the Financial Secretary to the Treasury well knows, I am interested in the Bill on behalf of a number of rural authorities in Cheshire who were very concerned about the threat, now carried out, of a rise in interest rates and a refusal to increase subsidy. We were unable to clinch the argument during the Second Reading debate last week, because, although we pressed the Financial Secretary very hard to tell us whether local authorities would have some assistance by increased subsidy to meet the higher charges, the hon. Gentleman was reluctant or unable to give us an answer.

The other day, at Question Time, the Chancellor of the Exchequer was asked the same question. He, with his great authority, could have given the answer which the Financial Secretary, unfortunately, could not give or refused to give, but the Chancellor failed to satisfy us on this side of the Committee that he had any intention whatsoever of increasing the subsidy to local authorities following the imposition of the new burden, which will mean an increase of 2s. a week in the rent of every house built by local authorities. This will bear particularly hard on people in the rural areas, especially in view of the present wage rates of farm workers.

The Bill which we are now asked to pass through Committee was published on 16th February. The total sum provided for at that date as the total commitment of the Public Works Loan Commissioners was £1,000 million. If that sum was the right figure on 16th February, it surely could not be the right figure after the announcement by the Chancellor that the Bank Rate was being raised. If the figure were sufficient on 16th February it was not sufficient after that date.

The hon. Member for Kidderminster (Mr. Nabarro) talked about going on to the open market and borrowing. That was a sound argument a fortnight ago before the Bank Rate was increased, because the rates in the open market were such that local authorities would pay quite reasonably, but the rate now in the open market is obviously going to be higher, perhaps by 1 per cent. I do not know what the figure is, but perhaps the Financial Secretary will tell us the difference between the rates at which he announced the Board was willing to lend in the future and the general rate on the open money market.

If it is 1 per cent, on a £2,000 house that is £20 per year, which is 7s. a week, whereas if it is a half per cent, difference then it becomes 3s. 6d. a week. These are serious matters and obviously no local authority is going to the open market as it might have done a fortnight ago, but will go to the Board because of the Chancellor's announcement of the change in the Bank Rate. If the sum were sufficient in the view of the Government on 16th February, it is no longer sufficient today.

I ask the Financial Secretary to tell us: was this amount considered by those who consider such things before or after it was known that the Bank Rate was to be increased? If it was before, then our Amendment should be accepted right away because, obviously, the figure is not sufficient. The big local authorities, with their vast power, will still be able to wring from the financial people who hold the money bags in the City loans at low rates of interest, but those whom I represent, the small rural authorities, have not the power to do that. They want small loans and now they will be compelled to go to the Board. It may be that it is just the rural authorities and the small authorities generally who will find this significant.

Mr. Gibson

Hear, hear.

Mr. Scholefield Allen

My hon. Friend says "Hear, hear," but the larger authority he represents will be able to get the money whereas the small rural authorities in Cheshire will not be able to find it. We may be in the midst of a General Election in October and the cupboard will be bare. I ask the Financial Secretary to accept this Amendment. The Government cannot be embarrassed if they are not compelled to lend this money. It will only be lent if necessary, and it will have to be approved by the Board. It is only a ceiling. It is not a demand for that amount, and, therefore, I ask the Financial Secretary to accede to the request of my right hon. Friend and accept this Amendment.

Mr. James McInnes (Glasgow, Central)

I want to make an appeal to the Financial Secretary, because some hon. Members have been astounded at some of the figures the hon. Member for Kidderminster (Mr. Nabarro) threw about during his intervention in the debate. Unfortunately he is not here, and this is the third time he has disappeared from the Committee. Possibly he is away looking for some more inaccurate figures.

The hon. Member asserted that the total taken up by local authorities over the 12 months was approximately £300 million, but the Financial Secretary himself indicated during our previous debates that in February the borrowing reached a figure of approximately £49 million. So we can logically assume that on that basis the average per annum is about £600 million per annum.

I am concerned about the sincerity of the Government's announcement regarding their programme for the roads, bridges, tunnels and works of that kind. I want to cite two examples from Glasgow. The Minister of Transport has indicated that he is agreeable to the Whiteinch—Linthouse Tunnel scheme proceeding. That project will cost approximately £3½ million. It will inevitably involve the local authority going to the Public Works Loan Board for part of the money, because, of course, the Minister of Transport will give a 50 per cent, grant.

Another development in Glasgow is the extension and modernisation of the Glasgow—Stirling Road, which again has been approved by the Government. That will also involve the local authority making application to the Public Works Loan Board for the necessary money to commence operations. So from one city we have two illustrations involving, probably, a loan of £5 million.

Then there is the position of Glasgow under the Housing (Repairs and Rents) (Scotland) Act. Glasgow has 90,000 slum houses, but, on the other hand, it has more municipal houses than any other city in Great Britain. The total is 100,000, almost one-third of the population living in municipal houses. Under the Housing (Repairs and Rents) Act, we are asked to make an intensive attack on the slums that will involve the acquisition of sites and the payment of ground values. This is a third illustration of the additional expenditure in which Glasgow will be involved.

I want to ask the Financial Secretary if the Government are sincere in then-desire to expand the social services and to see the ambitious schemes which they have announced over the past few weeks come to fruition. If that is so, the amounts included in the Bill are inadequate to meet the demands of local authorities in this country, and if the Financial Secretary does not agree with the suggested increase of £200 million I can only ask him whether that figure would not be more in keeping with the needs of the situation.

Mr. K. Thompson

The last three speeches to which we have listened fulfil all the requirements of those who want to hear the case for the Amendment answered. We have the mighty London County Council complaining about the operation of this Bill.

Mr. Gibson

I want the hon. Gentle man to understand that I was not speaking for the London County Council. I was speaking for the ordinary man in the street.

Mr. Thompson

We have heard the voice of the ordinary man in the street with the London accent about the operation of this Bill, and presumably—

Mr. Arthur Moyle (Oldbury and Halesowen)

What is wrong with the London accent?

Mr. Thompson

Nothing. I have not complained about the London accent, but 1 do not want the London accent to detach itself from London on this matter.

We have heard of the effects of this Bill on other mighty local authorities. Then we had the hon. and learned Member for Crewe (Mr. Scholefield Allen) complaining about the operation of this Bill on the small local authorities, and in order to support his argument he turned round and blamed the big authorities, stating that it was all right for them because they were in a much more advantageous position and had nothing about which to complain. He said that they could raise the money by going to the private money market and getting long loans and advantageous rates of interest which put them in a better position than they would be by going to the Public Works Loan Board. That may probably be true. Certainly, so far as my own experience goes, it is true of the bigger local authorities.

I am appalled, every time local authority matters are raised in the House of Commons, at the way in which hon. Members of the party opposite continually set themselves out to denigrate the local authorities. [Hon. Members: "No."] They have no regard whatever for the skill and resources of our local authorities—

7.0 p.m.

Mr. Scholefield Allen

I was talking about the poor little rural authorities in Cheshire.

Mr. Thompson

This happens every time we discuss the affairs of local authorities.

The big local authorities are quite capable of managing their own financial affairs, quite capable of using skill and judgment as to whether to go to the Public Works Loan Board under the terms of this £500 million increase or to go to the money market—to choose the moment for the development operations and to obtain the greatest advantage to be gained as between the Board and the open market. They are capable of that. [An Hon. Member: "We said so."] I am glad to have confirmation of the regard of hon. Gentlemen opposite regarding the virility and vigour of the big local authorities. It is a novelty.

While the big local authorities, including Glasgow, look after their own financial operations with judgment and skill, there is plenty of opportunity, by the Public Works Loan Board provision, for the small local authorities in Cheshire and elsewhere to look after their needs. That is precisely what the Board is for.

In the meantime, let me remind hon. Gentlemen who have complained about the fact that there is a difference at the moment between the rate of interest of the Public Works Loan Board provisions and what might be obtained in the money market by the smaller authorities, that the Bank Rate is a movable figure. It can change in order to reflect the changing conditions of the times. The fact that it happens to be 4 per cent, at the moment is no indication, and ought not to be taken to be any indication, that it will remain there either for ever or for very long. It might go up again, and it might go down again. So we ought not to regard that as the basic argument on which to rest arguments in support of the Amendment.

I do not like to hear hon. Gentlemen arguing, as the hon. and learned Member for Crewe argued, that this is the end of all local authority housing, and that we shall not get the social service advantages, as they have been called, which the Government have announced already, just because there has been an increase in the interest rate of the Public Works Loan Board and a limit of £1,000million placed on the total. Nothing of the sort; local authorities are not ham strung as to the rents they may charge for their houses. That is a free decision for a local authority to take in the light of its own knowledge of its own local circum stances. Local authorities are perfectly free—

Mr. MacColl

Would the hon. Gentle man address himself to the relevant fact—if what he says is correct—that if local authorities are not to be hamstrung in their housing policy, they will have to borrow money? If Liverpool and Glasgow and London leave the open market and go to the Board, there will be nothing left for the rest of us, because they will swallow it all up, the cupboard will be bare and Crewe and Widnes and all the other places will have to whistle.

Mr. Thompson

I thought we had dealt with that.

Mr. MacColl

Will the hon. Gentle man deal with it?

Mr. Thompson

The big local authorities can look after themselves by getting more advantageous terms in the open market than they can get with even these advantages from the Public Works Loan Board.

Mr. MacColl

Not today.

Mr. Thompson

Of course they can. That is the experience of most local authorities.

Mr. McInnes

Would the hon. Gentle man explain to me the advantages which a local authority can obtain by a loan in the open market for housing purposes against the rates and conditions now offered by the Board?

Mr. Thompson

It is all knit up with the pattern of. its own financial structure. It is entirely a matter of how the local authority manages its own total financial operations of all kinds.

Finally, let me say this about the smaller local authorities being squeezed out. There is no final date fixed to a Bill of this kind, as hon. Members know. This is not £500 million for a specific period. This is not a total that can never be varied. This is a lump sum addition to the total funds available to the Board, and when that total is exhausted, my hon. Friend can come to the House again and ask for more. I see no reason, there fore, why this Clause should be altered in the way suggested by the Amendment.

Mr. Moyle

I did not intend to participate in this debate until I heard the first observation made by the hon. Member for Walton (Mr. K. Thompson), who apparently assumes that on this side of the Commitee we have not a good word to say for local government. Let me correct him by saying that we want local government to flourish, because then there will be no chance of dictatorship arising in this country. So I hope that the hon. Gentleman will qualify his rather sweeping allegation in that regard.

I have one or two misgivings about this Bill, and I want the Financial Secretary to reassure me. We have had another increase in the Bank Rate, which means that the taxpayer will have to pay more for credit accommodation, and so will the ratepayer. It is suggested by the Press which supports the party opposite that there should be a cut in the housing subsidy. Those facts being utterly unassailable, I cannot understand why the Government should reduce the loan issue from £1,200 million to £1,000 million. That is a simple issue which I would like explained. Is this an attempt to push over to the private lending houses the business normally done with the Public Works Loan Board?

I do not think that the Financial Secretary will be surprised if I tell him that I would much prefer the Public Works Loan Commissioners to cover all loans sought by local authorities rather than for local authorities to go into the City for what they want. I think it is wrong to boost the financial interests, which exact tribute but make no contribution to our economy.

Those are the questions which 1 want the Financial Secretary to answer, and if he is not prepared to accept the Amendment, will he undertake to reassure us that, if the issue provided for falls short of the need, he will come to the House and ask for further authority to increase the £1,000 million to £1,200 million?

The Financial Secretary to the Treasury (Mr. Henry Brooke)

Perhaps I could answer this debate most swiftly by un reservedly accepting the suggestion put to me by the hon. Member for Oldbury and Halesowen (Mr. Moyle) and assuring the Committee that if we found ourselves restricted by the £1,000 million, and the £500 million authorised by Clause 1 had been advanced, we should come to the House again. However, this has been quite a prolonged debate and the Committee probably expects of me a rather fuller and more detailed answer than that. I should like to give it, because I hope to be able to convince the Committee that there is no abstruse policy question involved and nothing sinister lurking round the corner. It is simply a matter of arithmetic and I believe that we have got the arithmetic correct.

The hon. Member for Widnes (Mr. MacColl) paid a deserved tribute to my predecessor for his clarity of mind and ruthlessness of action. I do not suppose that I can compete with him in clarity of mind and I doubt whether a Public Works Loans Bill is the most enticing ground on which to show ruthlessness of action, but I will endeavour to prove that what we are doing is to take a practical line.

There are two limitations put into these Public Works Loan Bills—first, the limitation as to the amount of the advances and, secondly, the limitation as to the amount of the advances plus commitments not yet taken up. First, I will deal with the advances, because evidently there was some uncertainty among hon. Members as to the rate at which the Board has been making advances. The present Act received the Royal Assent on 18th December, 1953, and authorised £500 million of advances from that date. From that date up to 1st January, 1955—that is just over the 12 months—the Board advanced £316 million. The figure had risen by 1st February to £364 million, and by 25th February to £413 million.

Those were the figures that I gave on Second Reading. I should like to bring the Committee right up to date with the latest information about this. The figure today, 7th March, is £431 million. The permitted maximum is £500 million, so we have left authorisation for only £69 million. For that reason I was particularly glad to hear the right hon. Gentle man the Member for Colne Valley (Mr. Glenvil Hall) say that he did not wish to delay the passage of the Bill to the Statute Book.

In the old days these Public Works Loans Acts authorised a figure of advances only, and made no mention of commitments. I think that it was during the time when the right hon. Gentleman the Member for Colne Valley occupied the position which I now have the honour to hold that an opinion was given by the Law Officers of the Crown that it would be ultra vires for the Public Works Loan Board to enter into commitments beyond the figure which it was authorised to advance by Act of Parliament. There fore, from that time onwards, it became necessary not only to authorise a ceiling of advances but to authorise as well a much higher ceiling of advances plus commitments. The first such powers were taken in the Public Works Loans (No. 2) Act, 1946.

In the 1953 Act the ceiling of advances is £500 million and the ceiling of advances plus commitments is £1,200 million. The purpose of the Amendment is not to change the figure of £500 million—that is contained in Clause 1 which the Committee accepted—but to urge that the figure for advances plus commitments should remain at £1,200 million. My business is to explain to the Committee as clearly as I can the reason why we think that £1,000 million is a more realistic figure than £1,200 million.

7.15 p.m.

I say at once that if one were to fix the figures for advances plus commitments too low certainly any Government would be embarrassing themselves because they would have to come back to the House of Commons, as the hon. Member for Oldbury and Halesowen indicated earlier, before the £500 million of advances was used up. It has always been accepted, ever since 1946, that it should be what I might call the Clause 1 figure, the figure for total advances, which is the real restraint. The figure put into Clause 2, the figure for advances plus commitments, is a figure which is thought to be suitable and not likely to be reached until the £500 million in Clause 1 has been exhausted. Therefore, it becomes particularly apposite to examine what the position is at present.

At present, £431 million have been advanced since 18th December, 1953, and the total outstanding commitments are £501 million, making a total of advances plus commitments of £932 million. That means that we have £69 million in hand under Clause 1, but we have £268 million in hand under Clause 2 because the pre sent limit under Clause 2 is £1,200 million.

Mr. Glenvil Hall

The figures are interesting, but they mean that there have been no applications and no moneys advanced other than the amount the hon. Gentleman mentioned—that is, the difference between £413 million and £431 million—since we had our debate last week, because last week the advances and commitments came to £932 million. At that time the commitments went up to 19th February only. The figure the hon. Gentleman now gives is the same—£932 million. That means that nothing has happened during the last week.

Mr. Brooke

The figure I gave of commitments was not for 1st March, but for a date in the middle of February. I think it was 19th February.

Mr. Glenvil Hall


Mr. Brooke

Those are not strictly comparable. Perhaps I can best help the Committee, the right hon. Gentleman having raised the point, by giving the comparison between 1st February and 7th March. At 1st February the advances were £364 million and the total of advances plus commitments was £909 mil lion. Since 1st February, the total of advances plus commitments has gone up from £909 million to £932 million; that is to say, an additional £23 million of commitments have been entered into by the Board. But the amount advanced has in that period gone up from £364 million to £431 million—an increase of £67 million.

Local authorities have been rapidly taking up loans to which the Board was already committed, their financial advisers no doubt pointing out that they might not be able to get as favourable a rate of interest unless they acted quickly. Those are the figures to which I have addressed myself—the figures of £431 million of advances and £932 million of advances plus commitments.

I have to ask myself what figure it is justifiable to put in Clause 2, accepting the fact that £500 million is the figure in Clause 1. My judgment is that, the Committee having accepted £500 million as the ceiling for Clause 1, it will fully suffice to put the ceiling for Clause 2 at £1,000 million. Frankly, we should be all right under the present Act if we had a ceiling of £1,000 million in Section 2 instead of £1,200 million, because it seems fairly clear that, as things are going at present, the advances under Section 1 would reach £500 million quicker than the total of advances plus commitments under Section 2 would reach £1,000 million. But I am not resting solely on that. I have also to look to the future.

I would remind the Committee of the changes in procedure which have been agreed to by the local authorities within recent months. The first was that the local authorities agreed that, as from the end of last year, commitments which were more than two years old and which had not been taken up by the local authorities should be cancelled. As I told the House on Second Reading, commitments amounting to approximately £170 million were thus cancelled. Secondly, a new procedure has been agreed to for obtaining the approval of loans from the Board.

Up to the present, the practice has been that the Board was asked to approve, and did approve, a loan in principle at the same time that the sanctioning Ministry issued its loan sanction to the local authority. Indeed, when it obtained its loan sanction, the local authority received, as it were almost automatically, approval in principle for the granting of the loan from the Board. That practice resulted in the Board being committed to make a great many loans which, in fact, it was found that the local authorities did not take up either because they decided not to proceed at all, or not to proceed for the time being, or because they found that they could get the money elsewhere, or, it may have been, because in some cases they decided not to raise the loan and preferred to pay for the project out of revenue.

That was how it was found that there was this very substantial slice of £170 million that had been lying on the books of the Board for more than two years and had not been acted upon. The local authorities have themselves agreed that, in future, the loan application procedure shall be revised, and that the local authority will only come to the Board to seek approval of a loan if it is virtually certain that the authority is going to take up the loan from the Board.

When that system is operating fully, it should mean that the local authorities will not need to obtain approval from the Board until quite a short time before they are actually going to take up the money, and this backlog of old commitments which seem never likely to be taken up will disappear. Indeed, my judgment is that by the end of this year, bearing in mind that under the previous decision about commitments entered into—

Notice taken that 40 Members were not present; House counted, and, 40 Members being present

Mr. Brooke

I was just explaining that in my judgment we shall find that by the end of this year there will be some thing over £100 million of old commitments which will by then be over two years old and which have not been taken up. The Committee will bear in mind that the last operation of clearing away commitments which were two years dead removed all those entered into in the year 1952 or earlier.

I do not know whether the local authorities will agree to a similar sweeping away at the end of this year, and I certainly do not wish to compel them in any direction. But I can assure the Committee that under this new procedure, which is completely agreed between the Board and the local authorities, the average period which elapses between the time when the Board gives approval in principle for a loan and the time when that loan is actually taken up by the local authority concerned is going to diminish very substantially. That means that, in future, we shall not need anything like this gap of £700 million which we have had for the past year or two between the £500 million and the £1,200 million.

Mr. Douglas Jay (Battersea, North)

Though that change, as the Financial Secretary explained last week, will operate in one direction, does not the hon. Gentle men realise that there has been another change, that is, that the havoc caused in the capital market by the rise in the Bank Rate will operate in the opposite direction by inducing local authorities to go to the Board rather than to the City? Has the hon. Gentleman taken that into account?

Mr. Brooke

The right hon. Gentle man's intervention prompts me to say that I should have thought that the logical course for the Opposition, if it were troubled about that point, would have been to seek to amend Clause 1 rather than Clause 2, because it is Clause 1 which is going to be the limiting Clause. If it is felt that there will be a rush on the Board, it really does not matter what figure one puts in Clause 2, because it is the £500 million in Clause 1 which is going to be used up.

The case which I am putting to the Committee—and I think it is the only case that I have to answer under this Amendment—is that if £500 million is accepted as the proper figure under Clause 1—and it has been accepted by the Committee today without debate—then it would be otiose to put as large a figure as £1,200 million in Clause 2.

Mr. Jay

But the Financial Secretary will surely agree that in the previous Act the figures were £500 million and £1,200 million respectively.

Mr. Brooke

Yes, and I am pointing out that there have been these changes in practice and procedure which are undoubtedly going substantially to bring down the quantity of outstanding commitments not yet taken up. Indeed, I have pointed out that at present those out standing commitments amount to £501 million, that they are falling and that they will continue to fall. As I say, in my judgment there will be found by the end of this year to be about £100 million of dead commitments never likely to be taken up and which can be written off. All I am anxious to do is to put practical figures into an Act of Parliament. I submit that if £500 million is the correct figure for Clause 1, £1,200 million would be too large a figure for Clause 2, since this new agreement upon procedure has been reached with local authorities.

7.30 p.m.

I understand from what hon. Members opposite have said that they are still suspicious that some brake is being put upon local authorities. I explained during the Second Reading debate that this is a machinery Bill and not a policy Bill. I said that I thought that the £500 million was likely to last for about sixteen months, as it did last time, although nobody can forecast for certain. I should also like to remind the Committee that I said, in terms: I have conveyed no suggestion, nor have I any desire to convey the suggestion, that this Bill is a warning to local authorities not to pursue a borrowing policy."—[Official Report, 28th February, 1955; Vol. 537, c. 1804.] It is a piece of machinery enabling local authorities to get money from the Public Works Loan Board, and if it is felt that £500 million is the right figure to put in Clause 1 as the maximum for advances, I hope that the explanations which I have given will have convinced the Committee that it would be a mistake to continue the figure in Clause 2 as high as £1,200 million.

The figure of £1,000 million will be sufficient. We are likely to come to the end of the £500 million before we come to the end of the £1,000 million. I repeat my assurance to the hon. Member for Oldbury and Halesowen that should things turn out differently the Government will not hesitate to ask for further powers.

Mr. Glenvil Hall

Hon. Members on this side of the Committee are disappointed at the fact that the Financial Secretary has not accepted this very modest Amendment, which does no more than put into the Bill what was put into the last one. We are not surprised that he has not accepted it, however, because the Government never accept anything, however good it may be, that comes from this side of the Committee. We do not want to delay the Bill; we think that it is an excellent one.

As the Financial Secretary has informed us that the Board has less than £70 mil lion left from which it can make advances to local authorities it is obvious that the Bill should reach the Statute Book quite soon. I therefore advise my right hon. and hon. Friends not to divide, but to look forward to the time—which can not be very far ahead—when we shall be sitting on that side and produce Bills which will contain more realistic figures than the hon. Member had seen fit to put into this Bill.

Amendment negatived.

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

Mr. G. R. Howard (St. Ives)

I want to ask the Financial Secretary two very brief questions. I do not expect an answer now, because they concern rather a complicated matter, involving a good deal of back history. St. Ives has borrowed from the Public Works Loan Board in the past, and there is some difference of opinion how various sums must be repaid. The Treasury seems to take the view that they must be repaid out of the general rate fund, but the authority feels that this cannot be done. I should like my hon. Friend to look into this matter and see if some help can be given to the authority.

If it is not possible for it to borrow any more under the present Bill to cope with the abnormal storm damage that we have had in recent months, I hope that he will not allow it to affect Treasury approval under other legislation which we have just passed. I hope that the authority will be able to go to the Minister of Agriculture for loans or anything it wants to make good its harbour damage, which is a matter of national importance.

Mr. Brooke

I am glad that my hon. Friend did not press me to give an immediate answer to his question, because, even if I were able to do so, I doubt whether I could do it upon the Motion, "That the Clause stand part of the Bill" and remain in order. I have taken note of what he said.

Clause ordered to stand part of the Bill.

Clause 3 ordered to stand part of the Bill.

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