Clause 1.—(GRANTS FOR PUBLIC WORKS.)

HC Deb 11 July 1956 vol 556 cc490-531

7.43 p.m.

Mr. Emrys Hughes (South Ayrshire)

I beg to move, in page 1, line 7, after "Commissioners", to insert: at rates of interest not exceeding two and a half per cent.". This Amendment is in the names of myself, my hon. Friend the Member for Edinburgh, East (Mr. Willis) and my hon. Friend the Member for Fife, West (Mr. Hamilton). All three of us represent Scottish constituencies, but we believe this to be an Amendment which should receive the support of hon. Members representing constituencies in all parts of the country, including hon. Gentlemen opposite. I hope that before the debate ends we shall have a representative present from the Scottish Office, because this is a matter of grave concern to local authorities in Scotland. When the Bill was under consideration last Friday, there was considerable comment on the fact that although we have five Scottish Ministers, not one of them was present to explain the interests of Scotland.

The rate of interest of the Public Works Loan Board is the subject of discussion at practically every meeting of every local authority in Scotland at present. During the last twelve months hon. Members on both sides of the Committee have received protests from county councils and town councils, and have been called upon to exert the utmost pressure on the Government to reduce the rates of interest of the Board. This is our opportunity. Every local authority in Ayrshire has passed resolutions calling on the Government to reduce the rates of interest. These rates, which affect housing, education, public health and a variety of local government responsibilities, act as a sanction upon local government borrowing and expenditure.

In this Clause the Government agree to the lending to local authorities of a sum of £300 million. There is no doubt that that will be wise expenditure, because it will have received the sanction of the Minister and the support of the Treasury. Since the previous Bill of this kind came before the House the rate of interest has gone up 1½ per cent., and last Friday we had the extraordinary spectacle of a Minister introducing this Bill without making the slightest reference to the rates of interest. It was not only a case of Hamlet without the Prince of Denmark, but of Hamlet without the five acts.

Mr. Ede (South Shields)

Or the gravedigger.

Mr. Hughes

Or the gravedigger.

I suggest that the Committee would be doing a service to all these local authorities if this very reasonable Amendment were accepted, and the rates of interest reduced. I am prepared to be very reasonable with the Minister. If he would suggest 2½ per cent. or 3 per cent. or 2¾ per cent., hon. Members representing Scottish constituencies would be prepared to accept that as a sort of compromise. Here is an opportunity for the Minister to show that he is not enemy No. 1 of the local authorities.

Mr. E. G. Willis (Edinburgh, East)

But he is.

Mr. Hughes

In default of the other Ministers for Scotland, he is enemy No. 1.

In the debate on Friday it was pointed out that the addition of per 1½ cent. on a £1,700 house worked out at a rent of 8s. 7d. per week; and during discussions in the Scottish Standing Committee this week it was agreed that if we were arguing on a figure of 10s. a week, that would be quite a reasonable calculation. So we suggest that if the Minister wishes to reduce rents, this is an opportunity for him to show his practical sympathy. On Friday the Minister argued that local authorities must be prepared to do their share in contributing to economy. But it is a false economy to lend to local authorities at prohibitive rates. If we increase the rate of interest on housing and rents and rates, we make it impossible not only for local authorities to supply housing at reasonable rents, but indirectly——

The Deputy-Chairman

Order. The hon. Member must remember that this is a machinery Bill. He cannot go into the reasons for reducing interest rates.

Mr. Charles Pannell (Leeds, West)

On a point of order, Sir Rhys. I have taken an interest in this Bill over a number of years, and I wish to put this point to you. In previous years it has been allowed that the effect of the machinery on local government is a factor in these debates. I must draw your attention to this, because it so happens that this Bill was almost the first Measure to come forward after the change of Government in 1951, when interest rates were raised. I have made speeches on this matter almost every year, and I say with respect that the rules of order have never been so tightly drawn as you are now attempting to draw them.

The Deputy-Chairman

I think that the hon. Gentleman is quite right about the debate in 1951, but I venture to say that the discussion on that occasion was out of order.

Mr. Willis

This is an Amendment suggesting that money should be lent at a certain rate of interest. Surely, it is in order to give the reason why we suggest that this money should be lent at that rate of interest.

The Deputy-Chairman

It might be touched upon, but hon. Members cannot discuss the reasons, because the Bill is purely a machinery Bill.

Mr. G. R. Mitchison (Kettering)

Further to the point of order. The question of the rate of interest was extensively touched upon during the Second Reading. It was made clear at the time that this was a machinery Bill. I am looking through the HANSARD of 6th July, and I see repeated references to the rates of interest, but no rebuke from Mr. Speaker.

The Deputy-Chairman

That was a Second Reading debate, as the hon. and learned Gentleman knows.

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

Further to the point of order. I have with me reports of the debates on the previous Bill, when it was in Committee, and it is clear that the widest scope was allowed. This was not in 1951, but last year. A reasonable latitude seemed to be allowed on that occasion, and, I venture to suggest, might be allowed now.

The Deputy-Chairman

It is against the rules of order on a machinery Bill to go into the detailed reasons. That is clear.

Mr. Hughes

I bow to your Ruling, Sir Rhys. Of course, this is a machinery Bill, and we are suggesting something to oil the machinery. The present cost of the oil makes a difference to the working of the machinery. The Amendment would lower the rates of interest, and the machinery would promptly begin to work more smoothly.

I understand the position. I have made what I consider to be the main points in favour of the Amendment. The Minister who represents the Treasury is in a generous mood. He has done an extraordinary thing; he paid a tribute to my hon. and gallant Friend the Member for Brixton (Lieut-Colonel Lipton) such as my hon. and gallant Friend does not often receive. The right hon. Gentleman has gladdened the heart of my hon. and gallant Friend the Member for Brixton. By accepting the Amendment he could gladden the hearts of local authorities throughout the country. If he wants to figure as the hero of today's proceedings in the Committee of the House of Commons, and wants his photograph to be put up in every town hall in the country, including every municipal building in Scotland, all he has to do is to accept the Amendment.

Mr. Willis

I support the Amendment. It is important that the Government should look very carefully at what is happening to the money loaned by the Public Works Loan Board.

When the Minister introduced the Bill last Friday he told us that of the money loaned out of the authorisation of £500 million, namely, about £402 million, about £283 million had been spent on housing. If we are to take that as the general pattern of the spending of money borrowed by local authorities from the Board, most of the sum that we are now authorising will also be spent on housing. There can be no doubt that because of the present interest rate the cost of housing has become so excessive that many local authorities cannot afford to have a housing programme. The Amendment would reduce the cost of housing.

My hon. Friend the Member for Leith (Mr. Hoy) asked a Question some time ago and elicited the amazing fact that a local authority pays in interest more than twice the cost of the house it builds. Nobody can contemplate that fact without realising the fantastic situation at which we have arrived. A burden of debt is placed upon citizens for generations, for 60 years. We and our children might not see the end of it.

Our Amendment is quite modest. All it asks is that the rate of interest on this money should be not more than 2½ per cent. Replying to the debate on Friday last, the right hon. Gentleman showed why he could not see his way clear to do anything about this matter. As I understand, the argument was that this concession would represent a concealed subsidy to local authorities. He did not say that the Government were opposed to a subsidy. He said of my hon. Friend the Member for Widnes (Mr. MacColl): What he was, in fact, appealing for was a system of concealed subsidies to local authorities by enabling them to borrow at a rate of interest which was neither the market rate nor the Public Works Loan Board rate as now calculated, but Government credit itself. That is not our view of the way in which local authorities should be assisted by the central Government. We consider that such assistance should be done openly from Exchequer grants rather than by any concealed subsidies."—[OFFICAL REPORT, 6th July, 1956; Vol. 555, c. 1758] All right; is the right hon. Gentleman prepared to give local authorities grants to meet this cost?

What is the purpose of the present high rate of interest? As I understand from Government spokesmen, from the Chancellor of the Exchequer downwards, it is that we must decrease capital expenditure. The Government have an immense machine to control the expenditure of local authorities without touching interest rates at all. A local authority cannot erect a small lavatory in a school playground, or put up a bus shelter, without going to the Government for permission. Over and over again local authorities have been frustrated because of that situation, often in respect of very trivial expenditure indeed.

If the Government have this vast machinery for curtailing and curbing extravagance by local authorities, and for compelling them to conform to Government policy, why should the local authorities have to pay the present exorbitant interest rates in addition? What really happens as a result of the policy, that we are seeking to alter by means of the Amendment, is that the Government are curtailing the expenditure and the use of materials by the local authorities by placing an intolerable burden upon the citizens for the future. That seems to be very wrong indeed.

We suggest modestly that the rate of interest should not exceed 2½ per cent. If the Government are generous they can even lower that figure. The local authorities would be very pleased. Hon. Members have received many letters from constituents and from local authorities protesting against the interest rates. Many of the local authorities are good supporters of the Government.

Mr. Cyril Bence (Dunbartonshire, East)

They used to be.

Mr. Willis

Yes, but perhaps they are being weaned.

Why should not the Government give this relief to local authorities? There would be an argument if the Government had only this weapon of controlling the expenditure of local authorities, but in view of the vast machinery to which I have referred there is certainly no case, and there will be an intolerable burden on local authorities. In the interests of good government, and of the citizens as a whole, I suggest that the right hon. Gentleman consider very seriously the very modest proposal that we are making.

8.0 p.m.

Mr. Bence

I am amazed when I hear some of the words used here in dealing with financial questions. Last Friday, I heard the right hon. Gentleman say that this was a grant to local authorities of a maximum of £400 million from Government credit. I presume that meant that out of the credit of the Government local authorities would be entitled, during the next year, to draw up to £400 million credit.

The Government represent the State, so that is the credit of the State, yet in the next breath the Government say that they have to borrow credit from someone else. In borrowing from some other institution they have to pay 4½ per cent. or 5 per cent. and, therefore, they charge the local authorities more for the credit of the State because they cannot use their own credit and have to go to someone else for it.

We are faced with an astonishing situation. My hon. Friend the Member for Edinburgh, East (Mr. Willis) rightly said that we have a form of physical control. Because we do not use physical control we use the Bank Rate and financial sanctions to control credit. Here we have an instrument of physical control over the dispensation of credit.

Mr. Willis

Fiscal control.

Mr. Bence

This is machinery and, as an engineer, I say that it is physical control. We are not only using fiscal policy on an open market to put up intererest rates to avoid using physical control by Government, but are using both methods in the same instance. If we have a machinery Bill to see that local authorities do not get too much money the interest rates are put up to serve the same purpose. This seems to me to be stupid. It is like having a form of conscription to make a man do a job and, at the same time, rewarding him with the incentives we have under a voluntary system. This seems to me a complete contradiction.

Another thing which astonishes me is that we have a banking system which, through a great institution, creates credit and lends it. I cannot understand why the Government do not create their own credit. The bank lends credit which goes into commercial enterprise which is not used philanthropically or for social purposes. Here we are using credit for essential social purposes. In using it for those social purposes, why should we be tied down to financial techniques or principles of interest and usury for commercial dealings? In running the Army, the Navy and the Air Force and supplying troops we do not use commercial principles——

The Deputy-Chairman

The hon. Member for Edinburgh, East (Mr. Willis) succeeded in keeping in order in his speech. I hope that the hon. Member for Dunbartonshire, East (Mr. Bence) will follow his example.

Mr. Bence

I am sorry, Sir Rhys. I am always ready to recognise that I am not able to cultivate the ability of my hon. Friend the Member for Edinburgh, East (Mr. Willis) or my hon. Friend the Member for South Ayrshire (Mr. Emrys Hughes) to keep in order so well. I do my best, but it seems that I never succeed.

When local authorities build houses or do other social work they confine their activity purely to the social field, but the Government insist on them using the commercial technique of interest rates. When they appreciate that it is almost impossible for local authorities to work under those conditions they set up machinery of a fiscal character and arrange a subsidy. Why not start, by eliminating commercial practice? We could then avoid all the staff needed for working our subsidies. I am amazed that each year we have a Bill of this kind and leave the question open as to whatever will be the condition of the money market at that time.

Time and again we have pleas from farmers who want to know what we are doing about the long-term programme for agriculture. What are we doing about the long-term programme for local authorities? What is the use of telling them that this is a machinery Bill, assuring them of £400 million credit? For the famous burgh of Kirkintilloch it is no use saying that it can borrow £400 million; the burgh wants to know how much that will cost. For years I have mentioned the Kirkintilloch sewerage scheme——

The Deputy-Chairman

I hope that the hon. Member is not going to mention it again.

Mr. Bence

It is no use local authorities undertaking schemes unless they know what the interest rates will be. If local authorities do not undertake those schemes next year we shall have £200 million or £300 million left over. Is that the Government's objective? [Laughter.] My hon. Friends seem to treat this matter facetiously, but it is a very serious matter. In the County of Dunbarton every year the rates have been going up——

The Deputy-Chairman

So long as the hon. Member keeps to the Amendment that will be all right. He must take other occasions for raising other important matters.

Mr. Bence

This is very serious indeed, because every increase in the rates in Dunbartonshire is due to the progressive increases in interest rates which we have to pay for all the things we have to do. We are expected to do those things; the Scottish Office expects us to do them and the Government expect us to do them. That pushes the rates sky high. It is important when we have machinery Bills like this that there should be written into them every year exactly what the interest rates will be for the ensuing year. Then the local authorities would know and the poor ratepayers would know exactly what they had to pay.

I make this plea, although I do not suppose that the Treasury will listen. I hope to see the day when local authorities may use credit created by the Government and not borrowed from private institutions lending credit which, in fact, is the credit of the whole nation and charging interest on that credit which they hand to the right hon. Gentleman to hand on to local authorities, who have to pay interest on the nation's credit.

I hope that I have not gone too far out of order. I also hope that when the right hon. Gentleman prepares a Bill next year he will put into the machinery some of the oil about which my hon. Friend the Member for South Ayrshire spoke. As an engineer, I know that the finest machinery in the world will not work unless it is oiled properly. If it lacks oil it will seize up.

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

The Government have on many occasions, in the House, declared that one of their main anxieties is to secure stable prices, and indeed, as we recognise in their negotiations with industry and in their discussions with the trade union movement, they have emphasised that they expect the trade union movement, for example, to restrain its members from making new wage demands, on the assumption that prices will, as far as possible, be held on the plateau which the Chancellor of the Exchequer has discussed on several occasions.

It seems to me that this Amendment will help the Government and the Chancellor to achieve these very aims, and that is why I feel sure that the Financial Secretary, when he replies, will express his sympathy with it. I hope that he will even be able to express more than his sympathy—the Government's welcome and support for the Amendment. In fact, what my hon. Friends have very rightly pointed out, not only today but on many previous occasions, is that the main villian in the piece, so far as rising prices and increased wage demands are concerned, is indeed this very matter of interest rates. Here, we have a proposal which seeks, very properly, to reduce interest rates to a moderate figure, which would have the immediate, or at least the very early effect of reducing costs in the country, on housing and health services, etc., in the expenditure incurred both by public authorities, statutory authorities and the State itself.

I wish to give one example, because this matter of interest rates very seriously affects the whole of our economy and the whole of the social services which are an important part of it. We have rightly had stressed in this House the importance of making proper provision in the health field for those elderly persons who tend to have to be accommodated in hospital. My own local authority is about to seek permission to borrow sums of money for the purpose, amongst others, of constructing a new home for the elderly infirm at the request of the Government, and the problem of my own local authority, and of course of many others all over the country, in considering this matter—we have not yet got the loan sanction for the scheme—is that, when it receives it, this very much higher rate of interest than was current even a year ago, will have to be paid. If this Amendment were accepted, it would, in the instance which I have quoted, mean that the local authority would have to pay less in interest charges for this sum of money which it wants to raise.

The sum of £60,000 is required as part of the general borrowing requirements of the local authority of which I am speaking, and it is clear that a very considerable difference would be made if the Amendment was accepted. It would be possible for my own local authority to borrow from the Public Works Loan Board at this more moderate and reasonable rate of 2½ per cent., instead of having to borrow at a rate of over 5 per cent. if it has to get the money by going either into the open market or by borrowing through the Public Works Loan Board at the rates of interest that are current today.

I suggest that here is a practical example of a local authority faced with these unnecessarily high interest rates, which inevitably it has to take into account in deciding whether to go forward with this vital scheme for the care of our old people in Newcastle. I suggest to the Government that here we have a case in which it might well be that because of the high interest rates, the local authority may feel itself unable to go forward with this particular scheme. If so, what will be the result? The result will not be to the satisfaction of hon. Gentlemen opposite, but will be seen in extra pressure on hospital accommodation and increased expenditure there.

The Deputy-Chairman

The hon. Member has so far kept very well in order, but he is now reaching the limits.

8.15 p.m.

Mr. Blenkinsop

I shall make haste to come back fully within the rules of order in that case, but I was merely using that example as an illustration of the value of this Amendment to the Exchequer as well as to the local authority, because it will result in an economy for both, as well as for the country as a whole.

It would mean that the State itself would not be required to make as large a contribution out of Exchequer funds which is inevitably involved when interest rates rise. We know, for example, that the Exchequer has inflicted upon itself some further hundreds of millions of pounds a year in extra expenditure on these high interest rates, which year by year have been increased. This Amendment would provide, in effect, for a reduction of these charges, and the effect of the acceptance of the Amendment would be that the Government would be obliged to reconsider their general Bank Rate provisions. That is beyond the scope of this Amendment, but there is no doubt that that would be the effect in practice of the acceptance of the Amendment. It would mean a very considerable saving to the local authorities and to the Exchequer itself.

As my hon. Friends have so rightly pointed out, it is not as though the Government have no other means of defence against what they may feel to be the excessive use of capital for investment expenditure. They have within their grasp, if they wish to use them—and it is obvious, for there has been plenty of evidence—physical means of restriction, and therefore there is no reason at all why the Financial Secretary should not welcome this Amendment with open arms. I do not know whether that would be the right term to use in regard to the right hon. Gentleman, who accepts his duties in a very stern and rigorous manner. Perhaps it would not be proper to suggest that he would welcome the Amendment with open arms.

The right hon. Gentleman should, however, recognise the force in the argument which has been advanced. When the Chancellor of the Exchequer and other members of the Government are pressing for the restriction of expenditure and are calling upon local authorities to restrain their demands, and yet, at the same time, by their actions are forcing up the cost of the work which local authorities are obliged to undertake, and when in fact they are obliged to contribute more from their own funds to meet those high charges, it is a mad circle into which the local authorities are being forced.

It seems to me that my hon. Friends who tabled this Amendment are suggesting to the Government a means by which they can bridge the difficulty, with benefit to the Government, to the country and to everyone. It would also give the working people in the country some earnest that the Government themselves really wish to see reductions in the cost of services that are vital to the community, instead of talking about it and yet taking the very action most likely to raise those costs and to precipitate natural and proper demands for wage increases.

Mr. A. E. Cooper (Ilford, South)

This is really nonsense. For the last half hour we have been listening to the economics of Alice in Wonderland and watching hon. Gentlemen opposite performing the unique exercise of speaking with the tongue in both cheeks at once.

Mr. John Rankin (Glasgow, Govan)

Try it.

Mr. Cooper

The hon. Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop) really ought not to make the sort of speech he has made. He was at one time Parliamentary Secretary to the Ministry of Housing and Local Government.

Sir Frederick Messer (Tottenham)

No.

Mr. David Jones (The Hartlepools)

Perhaps the hon. Member for Ilford, South (Mr. Cooper) was not here then?

Mr. Cooper

He was the Parliamentary Secretary to the Ministry of Health, which was responsible for local government in those days, and it was his right hon. Friend the Member for Ebbw Vale (Mr. Bevan) who put up the interest rates—[HON. MEMBERS: "To what?"]—it does not matter—from 2½ per cent., which is the rate suggested by the Amendment. Yet the right hon. Gentleman put the rates up from that figure. Why was that figure of 2½ per cent. wrong at that time? It was wrong at that time because it was releasing far too many resources and bringing about inflation.

Mr. Blenkinsop

rose——

The Deputy-Chairman

Order. This argument is beyond the scope of the Amendment. The hon. Member for Ilford, South (Mr. Cooper) is carrying it too far. It cannot be pursued any farther.

Mr. Rankin

Surely, Sir Rhys, when a charge is made it ought either to be substantiated or withdrawn.

The Deputy-Chairman

I cannot say, before I hear a charge, whether it is in order or not. I have to hear it first.

Mr. Blenkinsop

As the hon. Member gave way to me for an intervention, may I ask, as this is strictly relevant to the Amendment, whether he is suggesting that it does not matter at all whether the interest rate be 3 per cent. or 5½ per cent.? I can assure him that the local authorities feel that it makes a good deal of difference.

Mr. Cooper

I am not suggesting anything of the sort.

This Amendment states that the rate of interest to be charged to local authorities should be 2½ per cent. I am suggesting—indeed, I am stating—that the hon. Member for Newcastle-upon-Tyne, East, when he was Parliamentary Secretary to the Ministry of Health in the Labour Government, put up the interest rates from the figure which is now suggested in the Opposition Amendment.

The Deputy-Chairman

That is not in order on this Amendment.

Mr. Blenkinsop

Do I understand the hon. Member to say that he would support the Amendment were the figure 3 per cent. rather than 2½ per cent.?

Mr. Cooper

I am not suggesting anything of the sort. It is not for me to suggest anything of the sort. I am merely pointing out that hon. Gentlemen opposite are quite prepared to say one thing when they are in Opposition and to do something quite contrary when they are in office.

The hon. Gentleman talked about the Government having in their hands powers like physical controls to settle all that the interest rates themselves do. Of course, that is true, but the point is that by the imposition of interest rates, at varying levels, the local authorities themselves know what their borrowing will cost, and they have control of the priorities for the work which they themselves seek to do.

Mr. Willis

Surely, if the Amendment were carried the same position would prevail, and the local authorities would be in exactly the same position?

Mr. Cooper

That, of course, would be the position, with this difference, that with 2½ per cent. no local authority would find it necessary to exercise any sort of control over its expenditure. That is precisely why, between 1945 and 1950, the Labour Government found it necessary to devalue the £. We believe that financial controls are essential. They constitute one reason for our certainty that we shall now defend the £.

Mr. Tom Brown (Ince)

It is rather remarkable that I should have the opportunity to follow the hon. Member for Ilford, South (Mr. Cooper), because I had something to say in criticism of his last speech in the House and I have even more criticism to make now. If what he has been pouring forth is his economics, I cannot understand them. If the hon. Member has had any experience of local government, whether at urban, rural or county level, I cannot understand how he could make such statements as he has made tonight.

There is a straight question I want to put to the Government, and it is this. Is it their intention to help local authorities, or is it their intention to hinder the work of the local authorities? If they intend to help the local authorities in the difficulties confronting them, they are bound to accept this Amendment. The Financial Secretary to the Treasury has had a great deal of experience on the London County Council. He knows full well that when the London County Council embarked upon a scheme of improvement or expansion it always desired to borrow money at the lowest possible interest rate. That was the policy it always followed.

My hon. Friend the Member for South Ayrshire (Mr. Emrys Hughes) has said already that county councils and urban authorities throughout the country are all complaining about the difficulties in which they are finding themselves because of the high rate of interest they have to pay upon borrowed money. I suggest to the Financial Secretary that it would be as well if he examined the position in relation to the conditions of those local authorities, for be it remembered that the local authorities have been facing considerable difficulties during the last eleven years.

They faced those difficulties with considerable courage. They have done a magnificent job because of the demands made upon them by the people, who had been too long satisfied with conditions as they were. The demand is going forth, quite rightly, for improved roadways and other amenities——

8.30 p.m.

The Deputy-Chairman

If the hon. Member will keep to the rate of interest he will be in order.

Mr. Brown

I know that it has been indicated that we are skating on very thin ice, but those of us who have had experience in local administration feel very keenly about this. I hope that you will not rule me out of order, Sir Rhys, if I recall that last Wednesday a very gloomy and dark picture was painted in the House of the country from which you come, when we discussed Mid-Wales and Monmouthshire.

I will not pursue that any further, however. I rose to call the attention of the Financial Secretary to the position of two local authorities in my constituency, Ashton-in-Makerfield and Ince-in-Makerfield, where we are now faced with the problem of land subsidence and having to construct a complete sewerage scheme, involving an expenditure of £200,000 to £300,000. The difficulties will be intensified unless the right hon. Gentleman is prepared to give some consideration to the Amendment. I beg him to do so in order that these local authorities may not be hindered but helped by the Government to do work which is so essential for the citizens whom they govern.

Mr. C. W. Gibson (Clapham)

I hope that the Government will seriously consider accepting the Amendment because, whilst this is a Bill to provide an extra £300 million in loans to local and other authorities for public work purposes, it is really absurd to tell the authorities that they can borrow more money whilst at the same time charging such high rates of interest that, to carry out any scheme at all, becomes utterly impossible.

We are supported in this contention by such an august journal as the Financial Times, which said on 16th March: The situation as far as mortgage loans are concerned is one of considerable difficulty. Money is far from plentiful and lenders are naturally seeking the highest possible rates for the longest possible periods. Rates of 5⅞ per cent. to 6 per cent. are being asked for the shorter period mortgages and 5⅜ per cent. to 5½ per cent. for terms up to 25 years. Anybody who has had anything at all to do with local government capital expenditure knows that today an interest rate of 5½ per cent. and more makes it completely impossible for local authorities to carry out their job effectively. The Amendment to fix a lower rate of interest would help the Government's overall policy of reducing capital expenditure.

I can give one illustration from the constituency of my hon. and gallant Friend the Member for Brixton (Lieut.-Colonel Lipton), where there is a large housing scheme. The tender cost was £2¾ million two years ago. The housing committee chairman reported that by the time the authority has paid the interest on capital borrowed from the Public Works Loan Board it will have paid £6¼ million. [HON. MEMBERS: "Shame."] Since then, the rate of interest has gone up by more than 1 per cent. so that the extra charge, either on the rents or the rates, will probably be many hundreds of thousands more for that one scheme alone. Therefore, when one considers all the housing schemes of large local authorities, such as Birmingham and Manchester, the interest charge at the present figure becomes a serious burden.

I should have thought that a Government anxious to encourage slum clearance would have been prepared to allow local authorities to borrow some of this £300 million at a rate of interest which would enable them not only to pull slum property down but afterwards to let houses at rents which the people could afford to pay. At the moment, that is not the case. Only last week three instances were reported in the newspapers of the serious effect of the present high rate of interest which is being charged to local authorities.

In Lewisham, the council has decided not to go on with an eight-acre slum clearance scheme because it says that the present financial policy of the Government has made that impossible. The Deptford Borough Council announced in the Press last week that, owing to the difficulties caused by interest charges plus the virtual abolition of the subsidy, it would not be able to continue house building in its borough. That is in the middle of London, where there is a terrific housing shortage, and this council would do its utmost not to stop building; but, owing to the financial policy of the Government and especially because of the high rates of interest now being charged, it has had to make this decision.

Mr. D. Jones

Will my hon. Friend explain whether it is necessary to get the sanction of the Ministry of Housing and Local Government before a local authority can borrow from the Public Works Loan Board? Would not that be a sufficient guarantee?

Mr. Gibson

I do not know whether to deal with that would be in order—

The Deputy-Chairman

In my opinion, no; it is very far out of order.

Mr. Gibson

It is true that this is a machinery Bill, but the point that I am trying to make is that there is strong justification for this Amendment. In fact it will help the policy of the Government by reducing the overall expenditure, if that is what they want, though I do not think the Government are going the right way to produce the results which they want.

What is more, a reduction of the present high rate of interest to 2½ per cent. would practically solve all the present financial troubles of local government. It would enable local authorities to let their houses and flats at reasonable rents which tenants could afford to pay, as well as enabling the authorities to do many other things. For instance, I have been today to the opening of a new park in London. I was told by the chairman of the housing committee that as a result of the financial policy which it is now necessary to follow, nearly half of that authority's schemes for park improvements in the next year have been stopped. And yet a Minister who spent several years on the London County Council is criticising my colleagues and myself because we were not doing enough for the parks of London.

The Deputy-Chairman

This is going beyond the Amendment.

Mr. Mitchison

On a point of order, Sir Rhys. What we have to consider, in relation to the Amendment, is whether there ought to be a fixed rate of interest or a maximum rate of interest, and what it ought to be. On the latter point, at any rate, I submit that it is proper to consider the character of the loans which are to be made; that is to say, whether they are, as in fact the vast majority of them are, loans already approved by the Government, for which Governmental sanction has been given, and the type of expenditure to which the loans are directed. I submit, therefore, that within reason my hon. Friends are in order in saying that these loans are, in the vast majority of cases, as the right hon. Gentleman would at once admit, already sanctioned by the Government and, further, are loans directed to certain public objects of which my hon. Friends may give particulars, within reason, in their constituencies.

The Deputy-Chairman

The hon. and learned Gentleman has stated the case fairly accurately. Of course the parts of the debate to which I have taken exception have gone well beyond that.

Mr. Gibson

I apologise to you, Sir Rhys, for allowing myself, in my enthusiasm, to be carried into L.C.C. politics. I was trying to make the point that high rates of interest have a deleterous effect on the work of local authorities.

This Bill, which provides for an additional £300 million of loans which local authorities can call upon after they have fiddled around in the market, trying to get loans from private lenders, ought to be so framed that the interest rates charged by the Public Works Loan Board should not be penal. They should not be so heavy as to make it impossible effectively to carry out the housing schemes, the road improvements, the park improvements, etc., for which local authorities will borrow this money.

A low rate of interest might have a tremendous influence on the cost of living. If it reduced rents, it would reduce one of the factors in the build-up of the cost-of-living figures. In that way, it would help the Government out of some of their difficulties. It would also set a standard of interest charges for housing societies and others who lend money for public purposes.

I am particularly concerned because it seems that as a result of the policy of allowing interest rates to rise—there does not seem to be any chance that the rate will stop at 5½ per cent.—we are preventing the carrying out of projects which the Government say they want done. Slum clearance will stop. Building by housing authorities is stopping. A local authority in Kent which is controlled by a Conservative majority has decided that, owing to the high interest charges, it can no longer lend money for house purchase.

Therefore, it seems to me that the Amendment is an extremely sensible one, because it will enable the Board to lend money—the Government have complete control over all these schemes, if they care to exercise it—for schemes which will effectively provide happiness and comfort for our people. If we are not here for that purpose, we are not here for anything.

The Minister ought to give consideration to this matter. It was pointed out a few nights ago that because interest rates have risen five times during the past year the weekly rent of a £2,000 house in London has risen by more than 10s. Somebody has to meet that charge. It can take the form of an increase in the rent, a method which some councils adopt, or it can be put on the rates, and then one has an unholy row with the local ratepayers' association about it. Acceptance of the Amendment would relieve the Government of that trouble at least.

Acceptance of the Amendment would also encourage local authorities. I find it difficult to understand how raising interest rates to local authorities on loans for public works of all kinds can make any difference at all to our balance of trade difficulties or our gold and dollar reserves. All it does is to make things more difficult for the people who matter most, those whose labour produces the wealth which the country enjoys.

Consequently, I support the Amendment with very great fervour, and I hope that the Government will accept it or at least look again at the Alice-in-Wonderland situation of interest rates.

Mr. James H. Hoy (Leith)

I support the Amendment. I have for a considerable time been putting Questions to the Secretary of State for Scotland about the effect of the high interest rates on Scottish housing.

On 6th March I asked the Secretary of State what effect the continual rises in interest rates were having on Scottish local authorities. We were given an astonishing figure. In the case of a £1,500 house built under the Labour Government, the interest charges over a period of 60 years amounted to £1,743, but since the Tory Government came to power, in 1951, interest rates have risen to such an extent that a similar house today carries an interest charge burden of no less than £3,446. Those are the figures given by the Secretary of State for Scotland himself. The interest rate on every single house built at a cost of £1,500 has doubled since the Tory Government came to power.

8.45 p.m.

What is the use of the Financial Secretary talking about keeping the cost of living down, or the Chancellor appealing to workers in industry to restrict their demands, if the Government are being so free with the nation's money to the money-lenders? The consequence of that is that every council house tenant in Scotland has already had to pay increases in rent and will have to pay further increases unless something is done to off-set these continually rising charges. If we tackle the interest rate, this intolerable burden which the Government have foisted on local authorities, we shall be going in the right direction.

I have a strange ally in the claim for lower interest rates, because on 6th March my hon. Friend the Member for South Ayrshire (Mr. Emrys Hughes), to whom the Committee is indebted for putting down this Amendment, asked the Secretary of State a similar Question. In the concluding part of his reply, the Secretary of State said: I hope that perhaps, with luck."— I agree that he thought that we required a little luck— on the next occasion the interest rates may be reduced, and then the Questions by the hon. Member on the subject may also be reduced. When I asked the right hon. Gentleman about these increases he said: As to the second part of the supplementary question, I can only express the hope that the next move in interest rates might perhaps be a downward one, in which case I might perhaps not get this sort of question."—[OFFICIAL REPORT, 6th March, 1956; Vol. 549, c. 1921–2.]

Mr. Rankin

On a point of order. Is is not most unfortunate that when my hon. Friend the Member for Leith (Mr. Hoy) is dealing with matters of such moment, not a single representative of the Scottish Office is on the Front Bench opposite?

The Deputy-Chairman

The hon. Member well knows that that is not a point of order.

Mr. Hoy

What I was hoping to prove to the Committee, and I am certain I have proved to the Financial Secretary to the Treasury, is that the Secretary of State for Scotland has given his sympathetic support to this Amendment. I am a little surprised, now that my hon. Friend has given him this opportunity, that he is not here himself, and has not sent one of his many Under-Secretaries to support the Amendment.

Mr. George Brown (Belper)

The Scottish Office is the most overstaffed Department in the Government.

Mr. Hoy

One can see at a glance what an appalling problem local authorities have. The Treasury has control, because local authorities can spend within this £300 million only if they get permission from the Treasury. The Treasury already exercises control and one would have thought that in the interests of good municipal government that would have been sufficient.

However, other authorities may make a claim. For instance, perhaps the Financial Secretary can tell us whether the Independent Television Authority can make a claim on this £300 million and, if so, what rate of interest it will be charged. Will it be the same as for local authority housing purposes? I suggest that the right hon. Gentleman will find that the I.T.A. pays a lower rate of interest.

The Deputy-Chairman

The hon. Member is now going beyond the Amendment.

Mr. Hoy

I do not want to get out of order. What I was seeking to do was to find out whether what I was saying about the £300 million was correct, and how the rate of interest which the Treasury charges local authorities for housing purposes compares with its interest rates to commercial television for its lines of business. I do not intend to go beyond that, but what I can claim is that what I have said proves up to the hilt that the intolerable burden which all housing authorities have to carry today is one which, since 1951, has been placed on their shoulders by the present Government. The figures which I have quoted tonight—not my figures, but the figures supplied by the Government themselves—condemn them out of their own months.

When the Government talk about carrying out a scheme of slum clearance at this time, they know that they are talking, as was said by the hon. Member for Ilford, South (Mr. Cooper), who departed from this Chamber after his one-minute speech, with their tongues in their cheeks. The Financial Secretary, as a leading ex-member of the London County Council, knows what the burden of these interest rates is on local authorities, and, surely, in all decency, he is bound to agree with the case put forward from this side of the Committee tonight. I beg the right hon. Gentleman to give serious consideration to this problem, knowing that my hon. Friend the Member for South Ayrshire will not be too sticky about 2½ per cent. Indeed, he has told me that he is willing to go in the other direction. He says that as a start he will accept 3½ per cent. if the Treasury will announce it tonight. He is prepared to be generous in the matter.

It is no use the hon. Member for Wimbledon (Mr. Black), who is the chairman of a building society, saying that the interest rates charged by the Government and foisted on the local authorities have had no repercussions on the people whom he supplies with money with which to build houses. As a consequence, the interest rates are higher now than they were under the Labour Government. Therefore, the hon. Gentleman had better not give us any more of that type of nonsense.

The Financial Secretary must face up to the high interest rate as it affects local authorities and housing and see that he brings about some reduction in the rate and makes it possible for local authorities to carry out the duties which the central Government places on their shoulders.

Mr. Ede

This Bill will provide money to be loaned to people other than local authorities. In fact, in some cases, the money will be lent to people whom the right hon. Gentleman the Financial Secretary himself brought into the scheme of things. On 4th April 1944, speaking on the Education Bill of that year, the right hon. Gentleman said: In connection with this Clause I feel rather like a duck that laid an egg and had it taken away from her to be hatched elsewhere, and later unexpectedly met her surprisingly grown-up offspring."—[OFFICIAL REPORT, 4th April, 1944; Vol. 398, c. 1954.] I have never thought that the right hon. Gentleman's claim to the invention of that form of loan was justified, but he wants to claim it for himself. Really he must be surprised at the grown-up offspring today because when those loans were inaugurated, to be advanced by the Public Works Loan Board, they were expected to provide interest and repayment of principal for 4½ per cent. Today, interest alone is at least 5½ per cent. The right hon. Gentleman, in those days, used to speak for the Archbishop of Canterbury. After Mr. Willink was brought into the Government the Archbishop of Canterbury selected the right hon. Gentleman as the new acolyte.

A large sum of money has been borrowed by the Church of England and also by the Roman Catholic Church, and larger sums will have to be borrowed in the near future by the same bodies because of the decision of the Government—rightly, I think—to speed up what is called rural reorganisation. Nothing is more appalling to the people who have to try to raise these sums of money and repay them than to be faced with these continual increases in interest rates. I am a Nonconformist but, together with the hon. Member for Wimbledon (Mr. Black), I am a governor of two Roman Catholic schools in his constituency—the Jesuit College and the Ursuline Convent. [Laughter.] It is not very amusing, especially when one has to meet the reverend mother prioress and she announces that upon the money she wants to borrow to carry on with the work of the school she has to find an additional 1 per cent.

I mention this because we do not want anybody to think that this is merely a quarrel between the Government and local authorities. A great deal of useful work is done by harbour boards and similar bodies, who have to raise capital in this way and then pay the interest charged upon it. The effect of Government policy in this matter has been seriously to handicap all the people engaged in these beneficient public works. My hon. Friend the Member for South Ayrshire (Mr. Emrys Hughes) is to be congratulated for putting down the Amendment and so enabling us to have this discussion.

I hope that the "duck"—I will not say the "duckie"—will tonight recognise the appalling size to which his offspring has grown; in fact, it must now be almost a swan, walking about on the earth. But a swan is graceful only when it is floating on the water. The right hon. Gentleman has made it quite impossible for his swan to float with any comfort to those who are now responsible for its sustenance.

Mr. H. Brooke

This has indeed become a debate of varied imagery. One and a half hours ago, when the hon. Member for South Ayrshire (Mr. Emrys Hughes) initiated it, he drew what seemed to me to be a somewhat far-fetched comparison with Hamlet without the gravedigger. Had William Shakespeare been sitting beside me, as my right hon. Friend the Member for Stratford, I might have heard him whispering, "Alas, poor Emrys" because I am afraid that I am not going to accept the Amendment. The hon. Member presented me with a frightful dilemma. He said that I had to choose between becoming enemy No. 1 of the local authorities and qualifying to have my photograph put up in every municipal building in Scotland. This is as bad a situation as that of the man who had to choose between the lady and the tiger. On balance, I have great regard for the amenities of Scotland.

The debate has proceeded upon two fallacies, which have been shared by every speaker, apart from my hon. Friend the Member for Ilford, South (Mr. Cooper). The first fallacy is the supposition that local authorities borrow only from the Public Works Loan Board and that everything can, therefore, be controlled by Clause 1. The truth is that local authorities borrow on their own credit in the market. They have at all times wished for their freedom to do so; they now have their freedom, and since last October it has been Government policy to require all local authorities to seek loans in the open market before admitting them to the facilities of the Board.

That will certainly remain Government policy, whether or not the Amendment is carried. Consequently, the effect of the Amendment would be to create a most surprising and unwelcome differentiation between the interest rates payable by different local authorities. It will indeed be, as the hon. Member for South Ayrshire said, a matter of very grave concern to local authorities not only in Scotland but elsewhere.

9.0 p.m.

A further point which has been taken by one or two hon. Members, but not openly realised by many, is that if the money is to be lent to the local authorities at 2½ per cent. that can only be achieved by a subsidy from the Exchequer, because it is impossible, in present circumstances, for the Exchequer to borrow this money in the open market at a 2½ per cent. rate.

Mr. Blenkinsop

Would the right hon. Gentleman not agree that I made the suggestion that inevitably this must mean reconsideration of the Government's policy in regard to interest rates?

Mr. Brooke

That is exactly what I thought was happening today. I thought that a skilful attempt was being made to hang on the peg of this Amendment a debate on the whole economic policy of the Government. I must confess that I was tempted to reply to many of these matters, but I intend, if I can, to keep myself in order and address myself to the methods by which local authorities can borrow.

I am entitled to say that if the Public Works Loan Board has to lend to local authorities at 2½ per cent. that must be with money from the Local Loans Fund, which itself is fed by the Exchequer, and the Exchequer must provide itself with the money, either by borrowing in the open market—which it cannot do at 2½ per cent.—or by the use of the printing press.

I think that what would appeal to those hon. Members opposite who talk about the nation creating its own credit, and so forth, is that we should get rid of all the apparatus of the money market, and resort to the printing press and uncontrolled inflation. [HON. MEMBERS: "Nonsense."] Whatever the interpretation may be, the fact remains that loans to local authorities at 2½ per cent. today involve a subsidy from somewhere. It would, in fact, be a subsidy from the Exchequer, that is, the taxpayer, and as a local government man I have listened with interest and some sadness to hon. Members opposite following one another avidly in the pursuit of what I regard as an entirely false idea—that local government will flourish entirely at the expense of the taxpayer.

On the contrary, I think that a proper balance has to be maintained between the interest of the ratepayer and the interest of the taxpayer, and where the taxpayer comes to the assistance of local government it should be done by an open subsidy, sanctioned by Act of Parliament, and not by the concealment which would be implicit in any method of this kind. There is, I know, a fundamental difference between the two sides of the Committee on this. Hon. Members opposite believe in the feather bedding of local government, as I said on Friday. [HON. MEMBERS: "No."] They have not the same desire that we have, that the local authorities—[Interruption.] I am still proud to be a member of a local authority——

Mr. T. Brown

Not a feather-bedded one.

Mr. Brooke

—and I believe in the freedom and responsibility of local authorities. I cannot believe that it is for the long-term good of local authorities that they should be artificially insulated from the play of economic forces.

When the hon. Member for Clapham (Mr. Gibson) says that under present conditions it is utterly impossible for local authorities to carry out any schemes at all, it is obvious that he was not present last Friday when we were discussing the Bill; and when the fact was established that since the new system was operated from October of last year local authorities have been borrowing from the Board at an average rate of £4 million a week. They have certainly been borrowing on a considerable scale from other sources as well.

Local authorities would not be borrowing this money if they were not finding it possible to carry out schemes of local expenditure.

Mr. Gibson

I gave three instances which have occurred during the past week of local authorities which have stopped building because they are in difficulties.

Mr. Brooke

I noticed that the hon. Gentleman gave the case of the Borough of Lewisham which, he says, decided not to go on with slum clearance schemes. I was afraid that things like that would happen when, two months ago, the Borough of Lewisham switched over to Socialist control.

There is a fundamental objection to this Amendment to which I have not yet referred, and which no hon. Member on either side of the Committee has perceived. This is the second fallacy which I said that I must mention. It is supposed by hon. Members who are supporting this Amendment that, by passing it, they would secure the issue of loans from the Public Works Loan Board to local authorities at rates of interest not exceeding 2½ per cent.—[HON. MEMBERS: "Hear, hear."] Hon. Gentleman say, "Hear, hear", but that is a policy which would not be provided by the Amendment, or by this Clause. It is, and will remain, whatever we do by this Clause, a statutory power of the Treasury to prescribe the rates at which the Public Works Loan Board lends. That is laid down in the Public Works Loans Act, 1897.

If we adopt this Amendment, the Committee will be cutting off from the Public Works Loan Board the supply of money to lend; because the Board would not be able to derive any money from the Local Loans Fund unless it undertook to lend money to local authorities at a rate not exceeding 2½ per cent. In present conditions it would be quite impossible for the Treasury to fix a rate of interest at 2½ per cent. for the Board to lend to local authorities.

When the hon. Member for South Ayrshire said—as he did—that this was an issue of very grave concern to local authorities, when the hon. Member for Dunbartonshire, East (Mr. Bence) said that a machine could work for some time without adequate oil, but would eventually seize up, both hon. Members were speaking with complete truth. In fact, the hon. Member for Dunbartonshire, East would be cutting off the oil from the machine and the whole work of the Public Works Loan Board would seize up, were this Amendment passed.

Now that we have had a very pleasant debate for a couple of hours, I should like hon. Members to give serious attention to the points which I have put before them.

Mr. Mitchison

I was here on Friday. So was the Financial Secretary. What he has been talking about was in some respects discussed then. I shall not repeat what was said, or make a long speech in answer to him.

Of all the insufficient and unsatisfactory replies, this is about the worst I have ever heard. The right hon. Gentleman went to the trouble of repeating that most unfortunate phrase "featherbedding local authorities". This follows shortly after our debate on the Finance Bill, when the right hon. Gentleman was making tax concessions to people earning between £5,000 and £7,500 a year. It is not a very remarkable idea to suggest for whom and upon what terms he ought to provide satisfactory beds.

Let us look at the "fallacies". I will deal with the first problem. The right hon. Gentleman referred to uncontrolled inflation. He seems completely to have forgotten—no doubt the Treasury looks at these matters from a somewhat remote fastness—that the question about which we are talking today, the loans made by the Public Works Loan Board to local authorities, are in respect of matters for which in practically every case the authorities already have the sanction of the responsible Minister.

Therefore, if the inflation is uncontrolled, it is simply because in this as in other matters the Government have no policy. Otherwise those who have to sanction these loans can exercise control at that point. My hon. Friends were perfectly right in saying that the fiscal control being exercised at present by the very high rate of interest charged to local authorities is a wrong and poor substitute for proper control over their policy by the responsible Ministers—in England and Wales the Minister of Housing and Local Government and in Scotland the Secretary of State, who appears not to be in complete agreement with his right hon. Friend on some important financial questions.

Let me deal very shortly with the second so-called "fallacy". It was rather unworthy of the right hon. Gentleman. He knows perfectly well what we have in mind, which is that there ought to be a maximum rate of interest for the loans made by the Public Works Loan Board, mainly to local authorities. It will follow from that that there will have to be a corresponding change in the rate of interest charged by the Treasury to the Public Works Loan Board. I did not suppose that the right hon. Gentleman would take refuge in that argument and say, "If Parliament carries the Amendment and decides that the right rate of interest is 2½ per cent., the Treasury will not provide any money at that figure". After all, Parliament looks after the money of the country. If the Amendment is carried, the right hon. Gentleman knows that the Government and the Treasury will have to think again. That is the plain and short answer to the second "fallacy".

I put the matter to the right hon. Gentleman a little more seriously. We ought to be very grateful to my hon. Friend the Member for South Ayrshire (Mr. Emrys Hughes) and to all my hon. Friends who have followed him. They have spoken in different styles and have made short and pointed speeches. The right hon. Gentleman, as a member of the Government, ought to recognise that this is not just a bit of Parliamentary fun. What he has heard today represents the feelings of local authorities over the country. Behind those local authorities is the feeling of the ratepayers and the rent payers, who are being made to pay for the Government's fiscal policy. That is what the right hon. Gentleman has to meet and face up to.

9.15 p.m.

I am not going to pick and choose among so many excellent speeches. I thought that each of them showed clearly the reality of what was being put to the right hon. Gentleman. There are two questions involved. The first question is, ought there to be a maximum rate of interest chargeable to local authorities? The second question is, if there ought to be such a maximum, ought it to be 2½ per cent.? I say, as has already been said in this debate, that no one on this side of the Committee wants necessarily to insist on 2½ per cent. If the right hon. Gentleman is prepared to say, "If you will be good enough to withdraw this Amendment, I will, on Report, introduce a suitable Amendment with another maximum rate". I very much doubt whether we would have to trouble the Committee much longer with this matter. The really substantial point is, ought there to be a maximum rate of interest?

I said to the right hon. Gentleman a few days ago, and say again now, that we are concerned here with vital services. Housing is one, health is one, education is another. If the right hon. Gentleman looks through the list, as I am sure he has done, to note the purposes for which the loans are used, he will see that many minor purposes are covered. All of them relate to things which have to be carried on. We are asking whether we are to expect the rate of interest to continue rising steadily, as it is rising under this Government, or are we to treat the present level as permanent?

I would remind the right hon. Gentleman that under my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) the rate of interest was 2½ per cent. and it stayed there. Under the late Sir Stafford Cripps the rate of interest for this purpose was 3 per cent. and stayed there. The moment this Government came into office, the rate of interest began to rise. It has continued to rise ever since, and no one knows where it will stop. In those circumstances, we must either expect this state of affairs to be temporary—in which case acceptance of the Amendment will do no great harm—or, if high rates of interest are to continue, this or some succeeding Government will have to consider whether they are prepared to make a subsidy—not a hidden subsidy, but a subsidy—to local authorities in the form of the rate of interest charged to them.

This is no news to the right hon. Gentleman; it is exactly what I said to him on Friday, and I did not say it without deliberation. We on this side of the Committee are considering this question very seriously. We are convinced that we cannot hold up the health, the education, or the housing services of this country by charging local authorities such high rates of interest that they cannot do the work they are required to do, because the rates and ratepayers and the rent payers will not stand it. If local government in this country—and, of course, I include Scotland—is to function properly, the question of these rates of interest will have to be faced in a way which the right hon. Gentleman, by his frivolous answer tonight, discouraged me from thinking he was prepared to face. It just is not good enough. This matter has got to be dealt with more seriously than that.

The right hon. Gentleman spoke of alternative sources. He knows perfectly well what has been happening. As a result of the policy of the Government, not merely in the last few months, not merely since the change-over to which he referred, the Public Works Loan Board has been failing, to an ever-increasing extent, to do this job and to meet the requirements of local authorities. If he gave it the sort of impetus and help which would be given by a fixed maximum rate of interest—for this purpose I am not tying mself to 2½ per cent.—he would allow it once more to do what it has been failing to do, to meet its public duty of lending money for public purposes to local authorities.

Mr. William Hamilton (Fife, West)

I want to supplement what was said by my hon. Friend the Member for Leith (Mr. Hoy) about the Secretary of State for Scotland. Although the Amendment is in the names of three Scottish Members, no Scottish Minister has condescended to attend any part of the debate. It is fortunate for the sake of our argument that in the debate in the Scottish Standing Committee yesterday, the Secretary of State said: At the end of May, 1956, 69 local authorities out of 230 in Scotland had no houses under construction. One local authority in three in Scotland has no houses under construction today.

Mr. C. Pannell

The Financial Secretary to the Treasury made the point that that anti-social conduct could come only from councils with Labour majorities. Perhaps my hon. Friend will deal with the Conservative ones.

Mr. Hamilton

The bulk of these are Conservative-controlled. The Secretary of State added: This contraction was in the main in the county districts and small burghs. Any Scottish Member knows full well that these are, in the main, Tory authorities. The Secretary of State continued, in the same context: For every 100 houses these authorities built in 1953, they now have under construction 76."—[OFFICIAL REPORT, Scottish Standing Committee, Tuesday, 10th July, 1956; c. 164.] That shows the effect of the Government's policy of high interest rates.

In my own local authority, Fife County Council, we have a Labour majority of one, and that council has resolved, no matter how interest rates vary, that it will build houses. In my constituency there is a village which has houses probably worse than those anywhere else in Scotland. My local authority has said, "We intend to build 90 houses there despite the penal rate of interest". Then, although the local authority has taken a decision by a majority of 16—an all-party decision—the Scottish Office say, "If you intend to build despite the interest rates we will stop you in any case." We are not being allowed to build the houses. When the penal interest rates do not have any effect the Government step in and do the dirty work.

Another point which has not been made so far is that one of the big problems which we face as a nation is the mobility of labour. Last week the Minister of Labour said that what we must do to increase the mobility of labour was to build more houses to let. Is that the policy of the Government? If it is, how are they encouraging local authorities to do that? Are they doing it by high interest rates? They know that that is not so. High interest rates are having the effect, as the Secretary of State for Scotland has admitted, of stopping one in three of the local authorities in Scotland from building any houses at all.

This is an intolerable position. The Government are stopping the building of houses and are, therefore, decreasing the mobility of labour. This is also having the effect of encouraging demands for increased wages. What is the use of the Government saying to the nationalised industries that they should stabilise their prices and then, having got an assurance, going to the T.U.C. and saying, "There, are not we good boys? Now you restrain your wage claims", and then, in the next breath, saying to the local authorities, "We are going to force you to put up rents, and when you have done that we will decontrol the privately owned houses and put up those rents as well"? There is no consistency in this. It is no contribution to the solution of our national problems. The right hon. Gentleman has made one of the most disgusting speeches that I have ever heard in the House of Commons.

Mr. Rankin

I should like, briefly, to deal with two points which were made by the Financial Secretary. He seemed to be rather worried about where to get cheap money. He ridiculed the idea of the 2½ per cent. which is suggested in the Amendment. But my hon. Friend the Member for South Ayrshire (Mr. Emrys Hughes) is not thirled to the 2½ per cent.

Mr. Emrys Hughes

Tied.

Mr. Rankin

I am sorry if I have used a word outwith the comprehension of the Minister; I do not want to take him out of his depth. I was saying that my hon. Friend is not tied to the 2½ per cent., and that, if the right hon. Gentleman is prepared to "talk turkey" in this matter, my hon. Friend is prepared to do a deal round about 3 or 3½ per cent. We shall be glad to hear what the right hon. Gentleman has to say on that point later.

I now want to deal with the right hon. Gentleman's first point. He seemed to think it was difficult to get cheap money. The right hon. Gentleman knows where to get it cheap. He knows where 2½ per cent. is being paid just now. It is being paid to Post Office savers, and the money is there. Millions of pounds of it are there, and that money can be had. That money goes to the Government, who, I assume, will pay the savings bank perhaps ¼ per cent. more for its work and charges in connection with the handling of that money.

From the City of Glasgow come millions of pounds to the Government at a cheap interest rate, and then, in turn, the Government pay perhaps no more than 2¾ per cent. or 3 per cent. for that money. When Glasgow requires it to build houses, the Government charge at least 5¼ and perhaps 5½ per cent. for the money which they got from the city at almost half that price.

It is quite clear that the local authorities can do a great deal to awaken the Government in this matter, and there is no reason why they should not go ahead with the formation of municipal banks in order that they themselves may provide the cheap money which the Treasury is finding it impossible to give them. It has been done before, and if the Treasury finds itself in that position, in which it is deprived of money which it presently uses and then lends back at double the price, because of the refusal to talk sensibly on this matter, it will have only itself to thank.

I want now to refer to the second point which the right hon. Gentleman made. He said that he did not want to insulate the local authorities artificially from the rigours of the market. He did not want them to be feather-bedded. The right hon. Gentleman used another phrase; he called it artificially insulating them. I should like to see at what point this insulation takes place, and I want to quote an example from a housing scheme in the City of Glasgow—one of the great new housing schemes going up in my own city. At Castle Milk, in the City of Glasgow, the five-apartment house costs £2,258. The rent which the corporation finds it necessary to charge for that type of house is £40. If it had to charge the economic rent for those houses it would require to charge £136 19s. 10d.

9.30 p.m.

The Government, knowing that that is an impossible rent to charge, pursue the policy—I have to be careful I use the phrase aright—of "artificial insulation." Yes, the policy which the right hon. Gentleman has just condemned. He is pursuing it because, recognising the impossibility of charging a rent of £136 19s. 10d. he gives £46 15s. as Government insulation to the corporation to prevent that rent from being charged. That is insulation, which he condemns, and which he could avoid by lowering the interest rate.

Out of the economic rent of £136 19s. 10d., £110 goes to the money-lenders, and he is the money-lender, and we all condemn the money-lender. Of course, he acts ex officio. The amount he hands out is £46 15s. After taking in £110 he gives back £46 15s. That is what they call high finance. I am sorry that the high financier, the hon. Member for Ilford, South (Mr. Cooper) has gone. He said that we on this side of the Committee were in Wonderland. I wish he had heard later of the kind of Wonderland that his Government have blundered into.

In addition to artificial insulation to the extent of £46 15s., the right hon. Gentleman goes on to inflate. For weeks we have heard his chief saying he is going to stop inflation. To get the rent down to £40 the local authority has to levy a statutory rate which brings in for each house £15 10s., and that is a form of inflation, but even that does not bring the housing authority's books into balance. To balance expenditure it has to levy an additional rate which brings in £34 14s. 10d. All that is inflation.

The right hon. Gentleman sits there without a blush on his face, yet he and his chief are doing what they have been condemning for week after week. They are inflating. They are artificially insulating. We have heard the right hon. Gentleman condemn these things tonight, and we have heard the Chancellor of the Exchquer condemn them during the last few weeks. The result of it all is an even bigger inflation, because the total housing deficit which the Glasgow Corporation has to meet this year is £1,176,000, as a result of the policies carried out by this Government and because of the high interest rates charged. My hon. Friend the Member for South Ayrshire, in his wisdom, has come along and offered an escape. I hope that the Government will not be so stupid as to ignore the lifeline that is being flung out to them tonight, because if they do not grasp it they will disappear without leaving a trace of where they have been.

Question put, That those words be there insterted:—

The Committee divided: Ayes 153. Noes 184

Division No. 264.]	AYES	[9.35 p.m.
Ainsley, J. W.	Grenfell, Rt. Hon. D. R.	Neal, Harold (Bolsover)
Allaun, Frank (Salford, E.)	Grey, C. F.	Noel-Baker, Francis (Swindon)
Allen, Arthur (Bosworth)	Hale, Leslie	Oram, A. E.
Allen, Scholefield (Crewe)	Hamilton, W. W	Orbach, M.
Awbery, S. S.	Hannan, W.	Oswald, T.
Bacon, Miss Alice	Harrison, J. (Nottingham, N.)	Owen, W. J.
Bence, C. R. (Dunbartonshire, E.)	Hastings, S.	Paling, Will T. (Dewsbury)
Blackburn, F.	Hayman, F. H.	Pannell, Charles (Leeds, W.)
Blenkinsop, A.	Herbison, Miss M.	Parker, J.
Boardman, H.	Hewitson, Capt. M.	Parkin, B. T.
Bottomley, Rt. Hon. A. G.	Hobson, C. R.	Plummer, Sir Leslie
Bowden, H. W. (Leicester, S.W.)	Holman, P.	Popplewell, E.
Boyd, T. C.	Holmes, Horace	Price, J. T. (Westhoughton)
Braddock, Mrs. Elizabeth	Howell, Charles (Perry Barr)	Probert, A. R.
Brockway, A. F.	Howell, Denis (All Saints)	Proctor, W. T.
Broughton, Dr. A. D. D.	Hoy, J. H.	Pryde, D. J.
Brown, Rt. Hon. George (Belper)	Hubbard, T. F.	Randall, H. E.
Brown, Thomas (Ince)	Hughes, Emrys (S. Ayrshire)	Rankin, John
Burke, W. A.	Hughes, Hector (Aberdeen, N.)	Redhead, E. C.
Butler, Herbert (Hackney, C.)	Hunter, A. E.	Reeves, J.
Butler, Mrs. Joyce (Wood Green)	Hynd, H. (Accrington)	Roberts, Albert (Normanton)
Callaghan, L. J.	Hynd, J. B. (Attercliffe)	Roberts, Goronwy (Caernarvon)
Champion, A. J.	Irvine, A. J. (Edge Hill)	Royle, C.
Chapman, W. D.	Irving, S. (Dartford)	Silverman, Julius (Aston)
Chetwynd, G. R.	Jay, Rt. Hon. D. P. T.	Skeffington, A. M.
Clunie, J.	Jeger, George (Goole)	Slater, J. (Sedgefield)
Coldrick, W.	Jeger, Mrs. Lena (Holbn & St. Pncs, S.)	Smith, Ellis (Stoke, S.)
Collick, P. H. (Birkenhead)	Johnson, James (Rugby)	Snow, J. W.
Collins, V. J. (Shoreditch & Finsbury)	Jones, Rt. Hon. A. Creech (Wakefield)	Sorensen, R. W.
Craddock, George (Bradford, S.)	Jones, David (The Hartlepools)	Steele, T.
Crossman, R. H. S.	King, Dr. H. M.	Stewart, Michael (Fulham)
Dalton, Rt. Hon. H.	Lawson, G. M.	Swingler, S. T.
Davies, Harold (Leek)	Lee, Frederick (Newton)	Taylor, John (West Lothian)
Davies, Stephen (Merthyr)	Lever, Leslie (Ardwick)	Thomson, George (Dundee, E.)
Deer, G.	Lindgren, G. S.	Timmons, J.
Delargy, H. J.	Lipton, Lt.-Col. M.	Wells, Percy (Faversham)
Dodds, N. N.	Logan, D. G.	Wheeldon, W. E.
Dye, S.	Mabon, Dr. J. Dickson	Wilkins, W. A.
Ede, Rt. Hon. J. C.	MacColl, J. E.	Williams, David (Heath)
Edwards, Rt. Hon. John (Brighouse)	McInnes, J.	Williams, Rev. Llywelyn (Ab'tillery)
Edwards, Rt. Hon. Ness (Caerphilly)	McKay, John (Wallsend)	Williams, Rt. Hon. T. (Don Valley)
Evans, Albert (Islington, S.W.)	McLeavy, Frank	Williams, W. R. (Openshaw)
Evans, Stanley (Wednesbury)	MacPherson, Malcolm (Stirling)	Williams, W. T. (Barons Court)
Fernyhough, E.	Mahon, Simon	Willis, Eustace (Edinburgh, E.)
Fienburgh, W.	Mann, Mrs. Jean	Wilson, Rt. Hon. Harold (Huyton)
Finch, H. J.	Marquand, Rt. Hon. H. A.	Winterbottom, Richard
Fletcher, Eric	Mayhew, C. P.	Woodburn, Rt. Hon. A.
Forman, J. C.	Mikardo, Ian	Yates, V. (Ladywood)
Fraser, Thomas (Hamilton)	Mitchison, G. R.	Zilliacus, K.
Gaitskell, Rt. Hon. H. T. N.	Moody, A. S.
Gibson, C. W.	Mort, D. L.	TELLERS FOR THE AYES:
Gordon Walker, Rt. Hon. P. C.	Moss, R.	Mr. Pearson and Mr. Simmons.
NOES
Agnew, Cmdr. P. G.	Boyle, Sir Edward	Donaldson, Comdr. C. E. McA.
Aitken, W. T.	Brooke, Rt. Hon. Henry	Drayson, G. B.
Allan, R. A. (Paddington, S.)	Brooman-White, R. C.	du Cann, E. D. L.
Alport, C. J. M.	Browne, J. Nixon (Craigton)	Dugdale, Rt. Hn. Sir T. (Richmond)
Amory, Rt. Hn. Heathcoat(Tiverton)	Bryan, P.	Duncan, Capt. J. A. L.
Armstrong, C. W.	Bullus, Wing Commander E. E.	Eccles, Rt. Hon. Sir David
Ashton, H.	Burden, F. F. A.	Eden, J. B. (Bournemouth, West)
Atkins, H. E.	Channon, H.	Errington, Sir Eric
Baldwin, A. E.	Clarke, Brig. Terence (Portsmth, W.)	Finlay, Graeme
Balniel, Lord	Cole, Norman	Fleetwood-Hesketh, R. F.
Barter, John	Conant, Maj. Sir Roger	Fletcher-Cooke, C.
Baxter, Sir Beverley	Cooper-Key, E. M.	Foster, John
Beamish, Maj. Tufton	Cordeaux, Lt.-Col. J. K.	Galbraith, Hon. T. G. D
Bennett, F. M. (Torquay)	Corfield, Capt. F. V.	George, J. C. (Pollok)
Bennett, Dr. Reginald	Craddock, Beresford (Spelthorne)	Gibson-Watt, D.
Biggs-Davison, J. A.	Crouch, R. P.	Glover, D.
Bishop, F. P.	Crowder, Sir John (Finchley)	Godber, J. B.
Black, C, W.	Dance, J. C. G.	Gomme-Duncan, Col. Sir Alan
Bossom, Sir Alfred	Deedes, W. F.	Gough, C. F. H.
Boyd-Carpentetr, Rt. Hon. J. A.	Dodds-Parker, A. D.	Gower, H. R
Graham, Sir Fergus	Lambert, Hon. G.	Raikes, Sir Victor
Grant, W. (Woodside)	Lancaster, Col. C. G.	Rawlinson, Peter
Grant-Ferris, Wg Cdr. R. (Nantwich)	Leavey, J. A.	Redmayne, M.
Green, A.	Legge-Bourke, Maj. E. A. H.	Remnant, Hon. P.
Grimond, J.	Legh, Hon. Peter (Petersfield)	Ridsdale, J. E.
Grimston, Hon. John (St. Albans)	Lindsay, Hon. James (Devon, N.)	Rippon, A. G. F.
Grimston, Sir Robert (Westbury)	Linstead, Sir H. N.	Robertson, Sir David
Gurden, Harold	Lloyd, Maj. Sir Guy (Renfrew, E.)	Roper, Sir Harold
Hare, Rt. Hon. J. H.	Low, Rt. Hon. A. R. W.	Ropner, Col. Sir Leonard
Harris, Frederic (Croydon, N.W.)	Lucas, P. B. (Brentford & Chiswick)	Russell, R. S.
Harrison, A. B. C. (Maldon)	Lucas-Tooth, Sir Hugh	Schofield, Lt.-Col. W.
Harrison, Col. J. H. (Eye)	Mackie, J. H. (Galloway)	Scott-Miller, Cmdr. R.
Harvey, Ian (Harrow, E.)	Maclay, Rt. Hon. John	Spearman, Sir Alexander
Harvey, John (Walthamstow, E.)	McLean, Neil (Inverness)	Steward, Harold (Stockport, S.)
Heald, Rt. Hon. Sir Lionel	MacLeod, John (Ross & Cromarty)	Steward, Sir William (Woolwich, W.)
Heath, Rt. Hon. E. R. G.	Maddan, Martin	Stoddart-Scott, Col. M.
Hill, Mrs. E. (Wythenshawe)	Maitland, Cdr. J. F. W. (Horncastle)	Studholme, Sir Henry
Hill, John (S. Norfolk)	Maitland, Hon. Patrick (Lanark)	Summers, Sir Spencer
Hinchingbrooke, Viscount	Markham, Major Sir Frank	Taylor, William (Bradford, N.)
Hirst, Geoffrey	Marlowe, A. A. H.	Thomas, P. J. M. (Conway)
Holt, A. F.	Mathew, R.	Thompson, Kenneth (Walton)
Hornby, R. P.	Mawby, R. L.	Thompson, Lt.-Cdr. R. (Croydon, S.)
Horsbrugh, Rt. Hon. Dame Florence	Maydon, Lt.-Comdr, S. L. C.	Thornton-Kemsley, C. N.
Hudson, Sir Austin (Lewisham, N.)	Milligan, Rt. Hon. W. R.	Tiley, A. (Bradford, W.)
Hughes Hallett, Vice-Admiral J.	Molson, Rt. Hon. Hugh	Tilney, John (Wavertree)
Hughes-Young, M. H. C.	Moore, Sir Thomas	Touche, Sir Gordon
Hulbert, Sir Norman	Nabarro, G. D. N.	Turton, Rt. Hon. R. H.
Hurd, A. R.	Heave, Airey	Vickers, Miss J. H.
Hutchison, Sir Ian Clark (E'b'gh, W.)	Nicholson, Godfrey (Farnham)	Vosper, D. F.
Hutchison, Sir James (Scotstoun)	Nicolson, N. (B'n'm'th, E. & Chr'ch)	Wakefield, Sir Wavell (St. M'lebone)
Irvine, Bryant Godman (Rye)	Nield, Basil (Chester)	Wall, Major Patrick
Jenkins, Robert (Dulwich)	Noble, Comdr. A. H. P.	Ward, Hon. George (Worcester)
Jennings, J. C. (Burton)	Oakshott, H. D.	Ward, Dame Irene (Tynemouth)
Johnson, Dr. Donald (Carlisle)	Osborne, C.	Whitelaw, W. S. I. (Penrith & Border)
Johnson, Eric (Blackley)	Page, R. G.	Williams, Paul (Sunderland, S.)
Joynson-Hicks, Hon. Sir Lancelot	Partridge, E.	Williams, R. Dudley (Exeter)
Keegan, D.	Pilkington, Capt. R. A.	Wills, G. (Bridgwater)
Kerr, H. W.	Pitt, Miss E. M.	Wilson, Geoffrey (Truro)
Kershaw, J. A.	Pott, H. P.	Woollam, John Victor
Kimball, M.	Powell, J. Enoch	Yates, William (The Wrekin)
Kirk, P. M.	Price, Henry (Lewisham, W.)
Lagden, G. W.	Profumo, J. D.	TELLERS FOR THE NOES:
		Mr. Wakefield and Mr. Barber.

Question put and agreed to.

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

9.45 p.m.

Lieut.-Colonel Marcus Lipton (Brixton)

One or two remarks of a general nature made a little while ago by the Financial Secretary were of such an extraordinary nature that some further comment is required before we part with the Clause.

I know that the Financial Secretary did not find it possible to accept the proposal made by my hon. Friend the Member for South Ayrshire (Mr. Emrys Hughes), but he based his rejection of any reduction in the present rate of interest on the argument that it was impossible for the Government to borrow at rates low enough to comply with the terms of the Amendment upon which we have just voted or to grant any concession whatever in respect of the current rates of interest charged by the Public Works Loan Board.

The right hon. Gentleman sail that if the Government were to make any reduction in the present rates charged by the Board, it would mean either an open or concealed subsidy on the part of the Government or resort to the printing press. I challenge that statement. Without granting a concealed subsidy and without resorting to the printing press, it is well within the Treasury's power to make a reduction in the rates to be charged upon the £300 million which the Clause seeks to authorise.

It can be done by this means. The Government have possession, in the Post Office Savings Bank—or they had on 31st December, 1955; this is the latest figure that I have been able to obtain—of balances due to depositors amounting to about £1,700 million, which, on the basis of the current rate of £300 million a year, would be sufficient to cover the Board's requirements for the next five years. Those deposits represent real money, not artificially created money; they are the savings of ordinary people, and the Government pay 2½ per cent. interest on them. It should be possible for the Government, in various selected fields of expenditure or loan sanctions, such as local government, to use the £1,700 million by lending it to local authorities at a rate of interest higher than 2½ per cent., in order to cover expenses, but certainly very much lower than the rates now charged by the Board.

It is lamentable that the Financial Secretary should seek to mislead the Committee by pretending that there was no possibility of the Government granting local authorities loans at a lower rate of interest than at present applies. The hardships imposed upon local authorities have been mentioned, and I shall not dilate upon them. By using funds placed at the disposal of the Government by ordinary savers at a rate of interest not exceeding 2½ per cent., the Treasury could, if it wished—unfortunately, it does not so wish—very considerably lighten the burdens of local authorities, whose task has been made virtually impossible by the policy pursued by the present Administration.

Mr. James McInnes (Glasgow, Central)

I want to deal with an aspect of the matter which the Financial Secretary has not mentioned. I refer to the Stamp Duty and fees which the Public Works Loan Board charges to local authorities seeing to borrow money from it. On page 13 of the Annual Report of the Board the Financial Secretary will observe that apart from Stamp Duty, of which the Board accumulates about £800,000 a year, the Board charges local authorities 4s. per £100 as a fee.

In 1955–56 the Board received from local authorities no less than £732,000 in respect of fees at the rate of 4s. per £100. The fees, in the words of the Report, are paid to meet … the cost to the Board (a) of examining applications for loans (including investigation of titles in respect of property loans), making advances and opening new accounts … and (b) of maintaining accounts over the periods of the loans, which vary from 4 to 80 years … In other words, that means all the work which is undertaken by the staff employed by the Board. The cost of the staff is also set out on page 13 and is given as about £54,700. Other expenditure, rent, rates, furniture, superannuation and so on amount to about £27,500.

That means that the Board receives from local authorities nearly £732,000 to meet an annual operating or administration cost of about £82,000 a year. I have calculated that during the past seven years the Board has received from local authorities fees of no less than £5,100,000 to meet operating costs of about £550,000, a profit on that aspect of the transactions of at least £4½ million.

During the last few years I have repeatedly directed the attention of the Financial Secretary to that aspect of the matter, and asked him whether it is not possible to reduce the fees from 4s. per £100 borrowed to 6d. per £100 borrowed. The cost to a city like Glasgow of borrowing money from the Board is about £70,000. If the duty were reduced to a rate of 6d. per £100 borrowed, Glasgow would pay only £8,000 to £9,000. That state of affairs applies to every local authority. Despite the fact that I have raised this issue year in and year out, I always get the same reply from the Financial Secretary—"We recognise what you say, we appreciate your point of view and we give you the assurance that it will be examined."

However, it has never been examined. At least there has been no alteration in that rate during the past seven years. I hope that the Financial Secretary will recognise that while it would be a small concession, it would, nevertheless, be a very beneficial concession to local authorities which have to contend with such an enormous burden as a result of the Government's interest rate policy. Such a reduction would tend, if only in a very small degree, to reduce the costs. I trust that in these circumstances the right hon. Gentleman will not this evening fob me off with the hardy annual by saying, "We recognise your point and we appreciate what you say. The matter will be examined," because then I should have to repeat this speech again next year. I hope that the right hon. Gentleman will deal with the matter tonight.

Mr. S. O. Davies (Merthyr Tydvil)

I had not intended to intervene in this debate, although I am naturally deeply interested, like most hon. Members on this side of the Committee, in the Amendment which was moved by my hon. Friend the Member for South Ayrshire (Mr. Emrys Hughes). My intervention has really been made inevitable by the shocking and offensive speech made by the Financial Secretary, in which he lectured the local authorities and showed such a pathetic solicitude for the money-lenders in the money markets of this country.

I hope that the right hon. Gentleman will read his speech tomorrow. I speak with some humility and with some years of experience of a local authority which, in common with other local authorities, was nearly blasted out of existence by Tory Governments in the inter-war years. I had hoped that because of the right hon. Gentleman's personal experience of local government he would exercise a little common sense and a sense of proportion.

Some of us in this Committee are still very proud of our magnificent local government structure with which, we believe, there is nothing in the world to be compared. Having listened to the lecture delivered by the right hon. Gentleman tonight to local authorities in which he said that they should exercise some sense of freedom and responsibility in the teeth of the most penal legislation that has been passed at the expense of local authorities in the last 40 years, I must, as I have said, ask the Financial Secretary to read his speech tomorrow.

Why this solicitude for the money-lenders? Why should the right hon. Gentleman urge local authorities to go to the money markets if they are not satisfied with the Public Works Loan Board? I speak as one whose constituency still has thousands of houses that are no better than slums. I and my constituents know what an appalling problem it is to try to rehouse people owing to the utterly unscrupulous and penal methods devised by the Government at the expense of the local authorities.

The Financial Secretary owes an apology to the local authorities. Insults have been added to injuries, and he should have been the last man to do it. I rose merely to make that protest on behalf of local authorities.

Clause ordered to stand part of the Bill.

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

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