§ 9.16 p.m.
§ Mr. E. G. Willis (Edinburgh, East)
I beg to move, in page 1, line 6, after "loans", to insert:at rates of interest not exceeding three per cent.
§ The Chairman
It might be for the convenience of the Committee if we take with this Amendment the other two Amendments on the Paper, namely, in page 1, line 7, after "Commissioners", insert:on such conditions that no interest payment shall be at a rate of interest higher than the Bank Rate in force at the time of that payment.In line 8, at end insert:Provided that loans granted to a local authority for the purpose of enabling or assisting that local authority to advance money under section four of the Housing Act, 1949, shall bear interest at a rate not exceeding three per cent. per annum.We can have Divisions on them separately, if required.
§ Mr. Willis
I noticed in the Press last night that the Treasury told the Southwark Trades Council that 2½ per cent. was a very satisfactory rate of interest for depositors in the Post Office, and I thought that the Financial Secretary might save us discussing these Amendments by saying that 3 per cent. was a satisfactory rate for local authorities to pay the Public Works Loan Board, but apparently, he has no such intention.
What has been happening in the period since the war regarding money lent to the authorities by the Public Works Loan Board? I want to look at this matter specifically in relation to Scotland, and no doubt my hon. Friends will do the same for England. When we examine what has been happening, we find that until 1951 the overall rate of interest for all outstanding capital debts of the local authorities fell steadily until 1950–51. Since 1950–51 there has, 1392 year by year, been a steady increase in the overall rate of interest paid by the local authorities in respect of their outstanding capital debts. That has come about as a result of the increasing cost of borrowing money.
Taking Scotland as a whole, I find that the increase between 1951 and 1956, owing to the gradually increasing rate of interest for borrowing, has been .5 or .6 per cent. In the City of Edinburgh, part of which area I have the honour and privilege of representing, the overall rate of interest for all Edinburgh Corporation capital debts had risen by .76 per cent. by May, 1956, and the Bank Rate had not really commenced to rise steeply until the middle of 1955. Then it began to go up from 4 per cent. until now it is 6¾ per cent. Therefore, it is fairly modest to assume that by this time the overall rate of interest would have increased by 1 per cent. That is a fairly modest estimate of the increasing burden of debt which local authorities have to bear as a result of the policy pursued by the Government.
I want now to look at the effects of this upon Scotland and various other places. In 1956 Edinburgh had an outstanding capital debt of £38 million. A variation of 1 per cent. means an increase in cost to Edinburgh of £380,000 per annum. If this is spread over the ratepayers it means an increase in the rates of over 1s. in the £. I know that hon. Gentlemen opposite will argue that most of it is in respect of housing and should be paid by the tenants of houses. In Edinburgh £26 million of that £38 million was in respect of housing, and an overall increase of 1 per cent. means an increased burden to be borne in respect of housing of £260,000. The result of this alone means an increase in rents of £8 10s a year.
I am sorry that the Joint Under-Secretary of State for Scotland is not present. He has been in the House all clay, and I appreciate that he wants to go away now, but we might have had another representative of the Scottish Office to listen to this debate, because we are dealing with important matters.
The Government told us for weeks in the Scottish Standing Committee and in the House, "You will have no problem at all if only you spread the increased costs over the houses built before the 1393 war." Day after day for months we listened to that argument in the Scottish Standing Committee. I repeat that on my modest assessment of the situation the increase means an addition of £8 10s. a year to the rent of every house. That increase is not justified by an increase in the cost of maintenance, but results solely from the Government's lending policy.
I also represent the small borough of Musselburgh, which has an outstanding debt of £2¾ million. An overall increase of 1 per cent. means 3s. in the £ addition to the Musselburgh rates if it is spread over the ratepayers. However, most of the sum is in respect of housing, and I calculate that the increase adds £10 per year to the rent of every municipal house there.
In May, 1956, Scotland's total capital debt was £531.5 million. An overall increase of 1 per cent. means an increase in interest charges for Scotland of £5.3 million, over £1 per head of the population of Scotland. Thus a man with a wife and three children has more than £5 a year to pay for no other reason than the Government's policy in respect of public authority interest rates.
At that same date, £402.5 million of Scotland's total capital debt was in respect of housing. The overall increase of 1 per cent. results in an increase of £9 per year for every municipal house in Scotland, including those built before the war. It is not only an onerous burden upon the people but a ridiculous state of affairs.
The Government's justification for increasing the Bank Rate is that it will restrict expenditure, but all this capital expenditure is already restricted and controlled through the Government having to approve local authority schemes. In other words, the whole machinery of control exists and is being used every day. Hundreds of civil servants are engaged in controlling expenditure by local authorities. Any restrictions in capital expenditure required in the local government sector of the economy can be achieved, as is done every day, without interest rates of this sort.
There is no justification for the increase in the rate of interest. There might be an argument in the case of private enterprise where there is no special machinery of control, but every Id, of local government expenditure is already controlled. 1394 Why, then, should we have this unnecessary duplication and this unnecessary burden of debt which people will have to bear for a long time?
The present housing position is fantastic. In reply to a Question by my hon. Friend the Member for Leith (Mr. Hoy), on 29th October, the Minister said that for a house costing £1,500, at present rates of borrowing, £4,980 would be paid in interest. What possible justification can there be for that? Surely there can be nothing more crazy, more stupid outside a lunatic asylum as the approach that one pays for men to build a house, prepare materials and acquire the land, £1,500, and for borrowing the money nearly £5,000. That is the economics of the madhouse.
§ Mr. Willis
The hon. Member says, "Rubbish." Is there any justification for paying the moneylenders £5,000 and the men who build the house £1,500?
§ Mr. Cooper
The rubbish I was referring to was that talked by the hon. Member for Wellingborough (Mr. Lindgren), who should know a great deal more about local government than appears to be the case.
§ Mr. Willis
I take it that the hon. Member agrees that this is a crazy situation. It is mad that we should pay that enormous sum in order to borrow the money with which to build a house costing £1,500.
The Government announced that they expected to build 300,000 houses a year and that in two years' time they would reduce that to 240,000. In doing so, the Government clearly said that they had the men and the materials available to build 300,000 houses. If we have the men, materials and the will to do it, need we pay all that interest? In the twentieth century, do we lack the ingenuity to plan our economy so that we can get the job done without placing that intolerable burden of debt, not only on this generation, but on generations yet unborn? My grandchildren will still be paying for this debt which will be created by Government policy.
I could say much more about this subject, but I know several of my hon. Friends want to speak and I shall not 1395 delay them. I do not expect the Government to say that they will accept the Amendment.
§ Mr. William Ross (Kilmarnock)
The Scottish Office has arrived in the person of the Joint Under-Secretary, the hon. Member for Pentlands (Lord John Hope).
§ Mr. Willis
However, there is a problem to be tackled. The Financial Secretary has a great reputation for his intellectual capacity. I do not quarrel with that. My quarrel with him is similar to that of G. K. Chesterton with George Bernard Shaw, namely, that at times he is all intellect and very little humanity. Surely he realises that this ought to be looked at.
If the Government cannot accept this Amendment tonight, would they not consider that it is time that this rather stupid and certainly impossible position was examined? It is the method by which use the control of credit to control our material resources that has brought about this stupid situation. Is it not time that some committee or commission looked into it so that we can devise a policy which will avoid these consequences.
§ 9.30 p.m.
§ Mr. Emrys Hughes (South Ayrshire)
I beg to second the Amendment and to support the arguments put forward with such a wealth of detail, facts and figures by my hon. Friend the Member for Edinburgh, East (Mr. Willis). He has certainly voiced the greatest grievance of Scottish local authorities, whether they are rich, like Edinburgh, or just small authorities that are now trying to face up to their problems. They are all faced with the problems created by increased rates of interest. There is hardly a local authority in Scotland that is not sending its representations to its Member and calling for a reduction in those rates.
These representations are not coming only from Labour-controlled authorities. One of the strongest representations I have ever had on this subject comes from 1396 the Town Council of Ayr, usually represented in these matters by the hon. and gallant Member (Sir T. Moore). That council was so dissatisfied with the lack of representation from its Member that it even sent urgent messages to those of us who represent other parts of the county. It is typical that the strongest representations come from Tory-dominated councils, which, when faced with the hard facts of raising money at high rates of interest, realise that the financial policy of a Tory Government is making things quite impossible.
The resolution that was passed by the Ayr Town Council demanded a reduction in the rate of interest "forthwith", and in supporting this Amendment tonight we on this side are trying our best to express the point of view of town councils in all parts of Scotland. I am not so sure that this 3 per cent. rate we are giving should not be 2½ per cent. Why should Edinburgh, for example, have to pay 6¾ per cent. and Damascus have to pay only 2½ per cent.? These figures may astonish the House, but we read recently of a Soviet loan to local authorities in Syria, in Egypt and in India at an interest rate of 2½ per cent. Surely the credit of a great and prosperous city like Edinburgh should stand higher than that of Damascus or Cairo, and we want to know what has become of the £ when, apparently, it stands lower than the rouble. By putting forward this argument that the interest rate should be 3 per cent., we are indeed taking a very moderate line.
It is true that this means heavy increases on the rent, £10 a year was one estimate given by my hon. Friend the Member for Edinburgh, East, and 1s. on the rates. Sometimes the Government try to play off the ratepayer against the tenant of a house. But when money is borrowed at the high rate of 6¾ per cent. for water schemes or roads or other local government schemes, the ratepayer is mulcted in the same way. So we have the steady increase in rates which makes the problems of those administering local government in Scotland almost impossible of solution.
We are trying to help the Government. They tell us that to deal with the financial situation caused by inflation we need a reduction in Government expenditure. I assume that on the £300 million for which 1397 borrowing sanction is given by the terms of this Bill, there will be an approximate rate of interest of £20 million. Were this Amendment accepted that figure would be reduced to £9 million, so that we are trying to help to reduce expenditure both by the Government and by local authorities. I should have thought that would appeal to the hon. Gentleman who is always telling us that the urgent and clamouring need of the moment is to reduce public expenditure.
Here we are trying to help him with his financial problem, but we are not sufficiently optimistic to expect much support for this Amendment from the benches opposite. Last week my hon. Friend the Member for Nelson and Colne (Mr. S. Silverman) talked about Scrooge. The hon. Gentleman does not come here tonight in the character of Scrooge, but rather in the character of Shylock, whose object was not so much to increase interest rates as to kill his enemy. I do not know whether the hon. Gentleman looks upon local government as his enemy, but he is doing his best to kill any real progressive activities by local authorities.
We have strong reasons for pressing this Amendment on the Minister, and in so doing we are voicing the views of all the local authorities. I do not wish to give details about the local authorities in my area because other hon. Members wish to speak, but we are voicing the point of view of every town council, every county council and every city council in Scotland when we do our best to call attention to the immediate necessity for a reduction in interest rates.
§ Mr. Ross
Anyone who looks at the Notice Paper will appreciate that it is a long time since we had an Amendment to discuss which is so clear and so implicit or so practical, or one that would cause so much heart-warming among Scottish local authorities towards the Treasury were it accepted. It is a simple Amendment to ensure that the loans under the Public Works Loan Board, instead of being at 6¾ per cent. interest—and who knows what will happen in the next few weeks?—be in future, or during the lifetime of this Bill, no more than 3 per cent.
If this Amendment were accepted, the immediate consequences would be to reduce the cost to local authorities of 1398 the houses that they are building, the hospitals they are putting up, the clinics, the transport which they buy for their departments, the water schemes which are involved in much of the progressive work, whether in relation to the old towns or the new towns, and the land drainage which has to take place throughout the counties and towns of Scotland, England and Wales. It would reduce the cost of all these.
We are told that the principal aim of the Government is to reduce costs; that this is the real way to end inflation. I should not be at all surprised if the Financial Secretary told us that the reason we must have 6¾ per cent. at the moment, and it may be 7 per cent. next month, is the same reason, that this is part of the battle against inflation. The speech of my hon. Friend the Member for Edinburgh, East (Mr. Willis) has shown that that is complete nonsense.
If it is necessary in other fields to have a high Bank Rate, the purpose of which is to prevent capital projects going on, the one field in which it is completely unnecessary is that of local government expenditure. Even if a local authority wishes to spend its own money, or to raise money for which there is no Government grant, it can be stopped by the Department of Health for Scotland, with the Treasury behind it. Every single item that has been listed, whether housing, hospitals, or anything else, first has to be authorised by the Department in Scotland, and, in the case of England and Wales, by Whitehall.
So, if the Government seek to limit the amount of work that is being done by local authorities, there is a simple way to do it without financially crippling them. That is what is happening to the local authorities: they are being financially crippled; and I certainly hope that the Financial Secretary will give us a favourable answer tonight.
It is something which every local authority, certainly throughout Scotland, wants, including, as my hon. Friend said, that Tory of Tory towns, Ayr, Sir Charles, in which both you and I were born. It is little wonder that the hon. Member who represents that town is not in his place, because he knows how the council of that burgh feels about it. It feels even worse about this high rate of interest of the Public Works Loan 1399 Board than it does about the loss of the Royal Scots Fusiliers. I am sure that it is because he is ashamed of what the Government are doing, and that it is probably because of inside information that they will not accept our Amendment, that he decided not show his face here tonight.
In other parts of Ayrshire, we are equally concerned. One of my own areas, Galston, a mining area, has been having correspondence with the Secretary of State for Scotland on this very point. I do not want to weary the Committee with the full correspondence, but I think that there are one or two extracts from this letter which should be read. It is all very well talking about how we feel, and the local authorities feeling this way and that, but when we get the actual words of this local authority I think that they are worth attending to.
The Town Clerk of Galston wrote to the Secretary of State, Scottish Home Department, on 14th October and, among other things, said this:It is evident, and all local authorities are aware, that the most economic thing to do"—in the present circumstances, with this crippling interest rate—would be to stop building. This, of course, they cannot do.Any hon. Member opposite who knows anything about housing in Scotland, where there are still 250,000 houses, on a survey made two years ago by the Secretary of State, to be demolished, will realise that a local authority cannot accept having to stop building; it must build.
The Town Clerk goes on to say:The rise in the Bank Rate is not caused by the housing problem and should not reflect so directly or so harshly on the present day housing position especially when commitments are entered into for a period of up to 60 years. To proceed on these lines is just financial suicide apart from being absolutely absurd. The only possible solution from a purely impartial point of view is, in consideration of my Council, to have a reduction in the existing rate.That is what we propose tonight.
What did this local authority get from the Department of Health in answer to this letter? It got:Your Council's representations have been carefully considered and I have to explain that in the opinion of the Secretary of State the Government's monetary policy must be 1400 settled in a wider context than that of housing alone. The current high rate of interest is one result of the measures approved by the Government in the national interest….It is not just one result; it is a result of the measures the Government have taken between 1951 and 1957 that have led us into this mess.
The letter goes on:A special concession concerning the rate of interest payable on housing loans could not but fail to weaken the impact of the Government's policy.Out of fairness, I should read the local council's reply. I will read it out fully.
§ Mr. Ross
It says:Dear sirs,I refer to your communication of 12th current. On behalf of my Council, I am instructed to reply as follows, viz. `specious nonsense'.Yours faithfully.We do not believe in wasting words in Scotland.
I sincerely hope that Government supporters who have at heart the well-being of local authorities and of those whose comfort and happiness, and whose possibilities of a reasonably decent life, are dependent upon local authority work in education, housing and other such matters, will appreciate the great barrier of the present high rates of interest. Responsibility lies with their Government and with the Treasury. They have an opporunity tonight of supporting us in asking for a reduction of those rates of interest to no more than 3 per cent., and I hope that they will accept that opportunity.
§ Mr. John McKay (Wallsend)
It is a great pity that this matter is being discussed at this late hour, because it is most important from the point of view of the welfare of the community at large. For that reason I shall intervene in the debate in my small way. There is a tendency to regard this as a Scottish question, but it affects also the whole of England and Wales. It is a very important issue.
It is a great pity the Labour Party has not taken up this matter officially and arranged a full day's debate. We have always said that we want to help the people to get houses, and this matter affects the ability of local authorities to provide homes in the future for their 1401 people. We know what a serious handicap interest charges are to the building of houses for rent.
We look at this question in various ways and come to various conclusions according to the line we want to emphasise. I am satisfied that when one considers the question of what working people can afford in rent one can delude oneself by thinking that with full employment and people working overtime working people can afford this. There is a general impression that the ordinary working man can afford it.
Nearly 3 per cent. extra has gone on to local government loans, and that of itself affects the cost. On a £1,200 house £36 a year extra is paid in interest alone—about 14s. a week. That 3 per cent. is a great penalty. If people throughout the country had to pay an economic rent there would be almost a revolution. It is only because the costs of housing are being spread over the rest of the people of the country that there is ability to implement this policy.
In order to get the support of the people at large, the Tory Party has made it a plank of its policy that it is out to help individual ownership of homes, but instead of helping the ordinary working man to pay for his house the Government have done the opposite. As a party they say they want to do something for working men who are in such difficulty and want to be independent. Those men like to have their own houses, the Conservative Party tells us, and the Government still pretend they are going to help the working man. It is not that the Conservative Government are unable to help them, but that they definitely decided that in this matter they will not help. They have given millions of pounds away in other directions. The question is, what is the most important direction in which to bring help to the people, particularly the ordinary working men, whose support they ask? They could do something in this direction.
When putting forward a proposition I always try to analyse the matter and get to know the cost, because I think there is an obligation on anyone making a proposition to say how much it will cost. I was told that there was to be a Division tonight. I understand that the Standing Order is suspended and we may 1402 have a Division at ten o'clock. [An HON. MEMBER: "Does the hon. Member know the time?"] Is it vital that we should finish this debate at ten o'clock? I do not think it is as vital as all that. The question whether the debate should continue for a few minutes after ten o'clock depends surely on the problem which we are debating. I am sorry, Sir Charles, but that was a digression from my argument arising from interruptions.
This is a very big problem for the country at large, and in my view I am entitled to continue my argument for a few moments. I will finish in three minutes and will time myself by the clock. What will be the cost of this Amendment? I await anxiously for the Minister to tell us. I have not had much time in which to analyse the matter, but I understand that the maximum liability here is £400 million and that if we calculate 3 per cent. on £400 million it amounts to an interest of about £12 million.
If that is correct, cannot the Government afford £12 million to help the ordinary working men of this country to get houses of their own or to have cheaper rents? Rents are becoming far too high. Throughout the land they are rising to such an extent that if any troubles befell the nation they will involve great hardship. Even on present wages they are a hardship and they will be a great problem in the future. We must do everything possible to reduce them.
Assuming that the cost to the country of this provision would be £12 million, let us consider the money which we have spent in the past. How many millions did it cost to give the investment allowances to the shipowners? What of the £30 million to £40 million allowed in special reliefs to those with high incomes? What of the 10 per cent. allowance in respect of fuel-saving equipment? When the spirit is willing it is astonishing what can be done.
I have emphasised in the best way that I can the need of the lower income groups, and I presume that I am speaking on behalf of the Labour movement in advocating these views tenaciously, strongly and to the best of my ability. This is one of the vital problems for the Labour Party. I therefore support the Amendment.
§ 10.0 p.m.
§ The Financial Secretary to the Treasury (Mr. J. Enoch Powell)
To conform as far as possible to the arrangements to which the hon. Member for Wallsend (Mr. McKay) referred, it may be convenient if I intervene at this stage. Although in accordance with your initial Ruling, Sir Charles, the debate has taken place on the three Amendments on the Order Paper, I think only the first has been referred to substantially, and perhaps I might confine my reply to that.
This Amendment would reduce to 3 per cent., not, as I think the hon. Member for South Ayrshire (Mr. Emrys Hughes) may have supposed, the rate paid by the Exchequer upon moneys which it borrows, but the rate paid by local authorities upon loans advanced to them by the Public Works Loan Board. The question whether that rate of interest should be so charged must be viewed against the background of the policy which covers access by local authorities to the Public Works Loan Board and which, as I explained on Second Reading, is as announced by my right hon. Friend the Lord Privy Seal on 26th October, 1955that all authorities who can borrow on their own credit shall make full use of the capacity of boththe stock and the mortgage market. In fact, as the Committee knows, in the last sixteen or seventeen months local authorities have financed about three-quarters of their capital expenditure by access to the market.
In those circumstances, it must follow that the residual lending by the Public Works Loan Board—that small minority of local authority capital expenditure which is financed by the Board—must be financed at the same rates that rule in the market, and at which the majority of local authority borrowing takes place. As my right hon. Friend said on the occasion which I have mentioned, it must be ata rate reflecting…the credit of local authorities of good standing in the market for loans of comparable periods."—[OFFICIAL REPORT, 26th October, 1957; Vol. 545, c. 215.]If that were not the rate at which the Board lent, there would be the most intolerable and indefensible discrimination between the rate of interest paid by local authorities who borrowed in the market and that paid by local authorities 1404 who borrowed from the Board—between the rate paid upon one borrowing and another. It would be quite indefensible that three-quarters of the borrowing by a whole range of local authorities should be at market rates while those authorities who happened to borrow from the Board should obtain those loans at a preferential rate.
§ Mr. Willis
Surely the Minister will agree that it is not the credit of local authorities which is at stake but the cost of money on the public market. It is the interest rates prevailing in the market.
§ Mr. S. O. Davies (Merthyr Tydvil)
Is it not the Government who have determined the rate of interest in the public money market?
§ Mr. Powell
It is the Government who have determined the policy whereby the majority of this borrowing shall take place in the market, and it is to that policy, in reality, that the issue raised by the Amendment goes. On that policy I would just mention the remark of the hon. Member for Edinburgh, East (Mr. Willis), who said, "Here are the resources with which to build a house for £1,500 or £2,000. Why is it necessary to charge this or that rate of interest upon it?" I will give him the answer. Those resources—the £1,500 or £2,000—have to be provided in one of two ways; by taxation, which imposes a burden upon the present generation in the present year, or by borrowing. If they are to be met by borrowing, then borrowing must be at the rate which will attract the necessary investment and the necessary savings.
§ Mr. Willis
I am sorry to disagree with the hon. Gentleman, but surely the basic fact is that we have the men and material. However we bring the two together to build the house, they are there. If we had no money system at all the two requirements would still be there.
§ Mr. Powell
The resources must be contributed by the community in one of two ways—either by taxation or by genuine lending. If they are to be provided by genuine lending they must be obtained at rates which will command the necessary amount of investment. If we seek to invest beyond that and at lower rates we are merely financing the investment by inflation.
The anxiety has been expressed a number of times during the debate that the 1405 prevailing level of interest may have the effect of repressing and damaging public investment. In fact, over the last six or seven years of relatively high interest rates the real investment in the public sector has gone ahead year after year at a rate which was never known in the days of low interest rates. What this policy does
§ is to ensure that this high level of investment in the public sector shall continue, but that it shall be financed honestly and not by inflation.
§ Question put, That those words be there inserted:—
§ The Committee divided: Ayes 115, Noes 145.1407
|Division No. 14.]||AYES||[10.5 p.m.|
|Ainsley, J. W.||Herbison, Miss M.||Parker, J.|
|Albu, A. H.||Holmes, Horace||Parkin, B. T.|
|Allaun, Frank (Salford, E.)||Hughes, Emrys (S. Ayrshire)||Pearson, A.|
|Allen, Arthur (Bosworth)||Hunter, A. E.||Peart, T. F.|
|Baird, J.||Hynd, J. B. (Attercliffe)||Pentland, N.|
|Benson, G.||Isaacs, Rt. Hon. G. A.||Plummer, Sir Leslie|
|Blackburn, F.||Janner, B.||Popplewell, E.|
|Blenkinsop, A.||Jay, Rt. Hon. D. P. T.||Prentice, R. E.|
|Blyton, W. R.||Jeger, George (Goole)||Price, J. T. (Westhoughton)|
|Bowden, H. W. (Leicester, S. W.)||Jeger, Mrs. Lena (Holbn & St. Pncs, S.)||Price, Philips (Gloucestershire, W.)|
|Bowles, F. G.||Jenkins, Roy (Stechford)||Probert, A. R.|
|Boyd, T. C.||Jones, Elwyn (W. Ham, S.)||Proctor, W. T.|
|Brookway, A. F.||Jones, Jack (Rotherham)||Randall, H. E.|
|Brown, Rt. Hon. George (Belper)||Jones, T. W. (Merioneth)||Reid, William|
|Butler, Herbert (Hackney, C.)||Key, Rt. Hon. C. W.||Roberts, Goronwy (Caernarvon)|
|Butler, Mrs. Joyce (Wood Green)||King, Dr. H. M.||Rogers, George (Kensington, N.)|
|Clunie, J.||Lawson, G. M.||Ross, William|
|Collick, P. H. (Birkenhead)||Lindgren, G. S.||Royle, C.|
|Collins, V. J. (Shoreditch & Finsbury)||Mabon, Dr. J. Dickson||Short, E. W.|
|Corbet, Mrs. Freda||MacColl, J. E.||Silverman, Julius (Aston)|
|Craddock, George (Bradford, S.)||MacDermot, Niall||Silverman, Sydney (Nelson)|
|Cullen, Mrs. A.||McGovern, J.||Skeffington, A. M.|
|Darling, George (Hillsborough)||McKay, John (Wallsend)||Soskice, Rt. Hon. Sir Frank|
|Davies, Harold (Leek)||MacPherson, Malcolm (Stirling)||Sparks, J. A.|
|Davies, Stephen (Merthyr)||Mallalieu, E. L. (Brigg)||Stones, W. (Consett)|
|Deer, G.||Mann, Mrs. Jean||Taylor, John (West Lothian)|
|Edelman, M.||Marquand, Rt. Hon. H. A.||Thomas, George (Cardiff)|
|Evans, Albert (Islington, S. W.)||Mitchison, G. R.||Viant S. P.|
|Evans, Edward (Lowestoft)||Moody, A. S.||Warbey, W. N.|
|Fienburgh, W.||Morrison, Rt. Hn. Herbert (Lewis'm. S.)||Wheeldon, W. E.|
|Finch, H. J.||Moss, R.||White, Mrs. Eirene (E. Flint)|
|George, Lady Megan Lloyd(Car'then)||Moyle, A.||Willey, Frederick|
|Grey, C. F.||Noel-Baker, Rt. Hon. P. (Derby, S.)||Williams, W. R. (Openshaw)|
|Griffiths, Rt. Hon. James (Llanelly)||Oram, A. E.||Willis, Eustace (Edinburgh, E.)|
|Hamilton, W. W.||Oswald, T.||Winterbottom, Richard|
|Hannan, W.||Owen, W. J.||Woof, R. E.|
|Hastings, S.||Paling, Rt. Hon. W. (Dearne Valley)||Yates, V. (Ladywood)|
|Hayman, F. H.||Palmer, A. M. F.|
|Henderson, Rt. Hn. A. (Rwly Regis)||Pannell, Charles (Leeds, W.)||TELLERS FOR THE AYES:|
|Mr. Simmons and Mr. Wilkins.|
|Aitken, W. T.||Clarke, Brig. Terence (Portsmth, W.)||Grosvenor, Lt. -Col. R. G.|
|Allan, R. A. (Paddington, S.)||Cole, Norman||Gurden, Harold|
|Alport, C. J. M.||Conant, Maj. Sir Roger||Harris, Frederic (Croydon, N. W.)|
|Armstrong, C. W.||Cooke, Robert||Harrison, A. B. C. (Maldon)|
|Atkins, H. E.||Cooper, A. E.||Harrison, Col. J. H. (Eye)|
|Baldock, Lt. -Cmdr. J. M.||Craddock, Beresford (Spelthorne)||Heath, Rt. Hon. E. R. G.|
|Baldwin, A. E.||Crosthwaite-Eyre, Col. O. E.||Henderson, John (Cathcart)|
|Balniel, Lord||Cunningham, Knox||Hicks-Beach, Maj. W. W.|
|Barber, Anthony||Currie, G. B. H.||Hill, John (S. Norfolk)|
|Barter, John||Dance, J. C. G.||Hinchingbrooke, Viscount|
|Bell, Philip (Bolton, E.)||Davidson, Viscountess||Hirst, Geoffrey|
|Bell, Ronald (Bucks, S.)||du Cann, E. D. L.||Holland-Martin, C. J.|
|Biggs-Davison, J. A.||Eden, J. B. (Bournemouth, West)||Hope, Lord John|
|Birch, Rt. Hon. Nigel||Elliott, R. W. (N'castle upon Tyne. N.)||Hornby, R. P.|
|Bishop, F. P.||Farey-Jones, F. W.||Horsbrugh, Rt. Hon. Dame Florence|
|Black, C. W.||Finlay, Graeme||Howard, Hon. Greville (St. Ives)|
|Boyd-Carpenter, Rt. Hon. J. A.||Fisher, Nigel||Howard, John (Test)|
|Braine, B. R.||Gammans, Lady||Hughes Hallett, Vice-Admiral J.|
|Browne, J. Nixon (Craigton)||Gibson-Watt, D.||Hulbert, Sir Norman|
|Bryan, P.||Glyn, Col. Richard H.||Hutchison, Michael Clark (E'b'gh, S.)|
|Butcher, Sir Herbert||Goodhart, Philip||Hyde, Montgomery|
|Butler, Rt. Hn. R. A. (Saffron Walden)||Graham, Sir Fergus||Iremonger, T. L.|
|Campbell, Sir David||Grant, W. (Woodside)||Irvine, Bryant Godman (Rye)|
|Carr, Robert||Grant-Ferris, Wg Cdr. R. (Nantwich)||Jenkins, Robert (Dulwich)|
|Channon, Sir Henry||Green, A.||Jennings, J. C. (Burton)|
|ChiChester-Clark, R.||Gresham Cooke, R.||Johnson, Dr. Donald (Carlisle)|
|Joseph, Sir Keith||Maydon, Lt. -Comdr. S. L. C.||Speir, R. M.|
|Joynson-Hicks, Hon. Sir Lancelot||Medlicott, Sir Frank||Spence, H. R. (Aberdeen, W.)|
|Kaberry, D.||Moore, Sir Thomas||Steward, Harold (Stockport, S.)|
|Keegan, D.||Nabarro, G. D. N.||Steward, Sir William (Woolwich, W.)|
|Kerby, Capt. H. B.||Neave, Airey||Storey, S.|
|Kershaw, J. A.||Nicolson, N. (B'n'm'th, E, & Chr'ch)||Summers, Sir Spencer|
|Leavey, J. A.||Nugent, G. R. H.||Sumner, W. D. M. (Orpington)|
|Leburn, W. G.||Oakshott, H. D.||Teeling, W.|
|Legge-Bourke, Maj. E. A. H.||Orr, Capt. L. P. S.||Thomas, Leslie (Canterbury)|
|Lindsay, Hon. James (Devon, N.)||Page, R. G.||Thompson, Lt. -Cdr. R. (Croydon, S.)|
|Linstead, Sir H. N.||Pannell, N. A. (Kirkdale)||Thornton-Kemsley, C. N.|
|Lloyd, Maj. Sir Guy (Renfrew, E.)||Pike, Miss Mervyn||Tilney, John (Wavertree)|
|Lucas, P. B. (Brentford & Chiswick)||Pilkington, Capt. R. A.||Turner, H. F. L.|
|Mackeson, Brig. Sir Harry||Powell, J. Enoch||Vickers, Miss Joan|
|Mackie, J. H. (Galloway)||Prior-Palmer, Brig. O. L.||Wall, Major Patrick|
|McLaughlin, Mrs. P.||Profumo, J. D.||Ward, Rt. Hon. G. R. (Worcester)|
|Macpherson, Niall (Dumfries)||Rawlinson, Peter||Webbe, Sir H.|
|Maddan, Martin||Redmayne, M.||Williams, Paul (Sunderland, S.)|
|Maitland, Cdr. J. F. W. (Horncastle)||Ridsdale, J. E.||Wills, G. (Bridgwater)|
|Markham, Major Sir Frank||Roper, Sir Harold||Woollam, John Victor|
|Marlowe, A. A. H.||Russell, R. S.||Yates, William (The Wrekin)|
|Marshall, Douglas||Sharples, R. C.|
|Mathew, R.||Spearman, Sir Alexander||TELLERS FOR THE NOES:|
|Mr. Legh and Mr. Hughes-Young.|
§ Motion made, and Question proposed,That the Clause stand part of the Bill.
§ 10.15 p.m.
§ Mr. W. E. Wheeldon (Birmingham, Small Heath)
I want very briefly to refer to the point made by the Financial Secretary to the Treasury when replying to the debate on the Amendments. My hon. Friend the Member for Edinburgh, East (Mr. Willis) said that the Government have kept control of local authority expenditure and, therefore, have no need to resort to high interest rates. Almost every penny piece of local authority capital expenditure comes within the survey or scrutiny of the appropriate Minister. He can say whether it shall be approved or not. The matter is completely in his hands. Why, therefore, is it necessary to have these extortionately high interest rates for local authority expenditure? That was the point to which the Financial Secretary did not address himself. I hope that in his further reply to this debate he will have something to say about it.
If that control is present, as it is—nobody can deny it—it follows equally that to resort to a policy of 6¾ or 7 per cent. interest rates is a policy whose object is penal and is designed to transfer money from working-class families and from the working-class population in general to people who are better off. The result of this policy by the Government in respect of the Public Works Loan Board and of interest rates generally is to put an intolerably high burden on the poorest of our population. It affects 1408 working-class people not merely in my constituency, but in every constituency.
The matter is mainly one of housing, because in the case of most local authorities at least 60 per cent. of their outstanding loan charges are in respect of houses. Within that context, the burden, therefore, falls on the rents of municipal houses. In respect of the other 40 per cent.—that is to say, roads, schools and all other capital expenditure—the burdens are, of course, borne by the ratepayers generally.
I should like to clinch the point by giving an illustration from my own city, Birmingham. We are building—or trying to build, so far as the Government will allow us—municipal houses and flats. At the moment, the average cost of a three-bedroomed municipal house in Birmingham is £2,148. The total interest charges payable on such a house during the sixty years of redemption of the loan is £6,727. The interest charges, therefore, are three times as much as the original cost of the house.
Surely there is something wrong with a system whereby charges of that kind are imposed on tenants of working-class houses. By way of comparison, had we been operating today on the rate of interest charged by the Labour Government when it left office, the figure would be not £6,727, but £2,500. That is a very considerable difference.
I have one other figure to complete the argument. That figure of interest charges means that the weekly rent of a three-bedroomed house, excluding rates, is £3 4s. 5d. per week—a very high rent 1409 indeed. I hasten, in fairness, to say that that ignores subsidies, but we all know that, as far as general housing is concerned, there are no subsidies today. Of that £3 4s. 5d. weekly rent, no less than £2 3s. is in respect of interest charges. I do not want to give too many figures, but there is one I must give for comparison. In terms of the rent, labour costs account for 7s. 11d. as against the 43s. for interest charges.
Those figures demonstrate, first, the existence of the problem, and secondly, that it is one which should be solved, and solved quicky, in the interests of the community at large. It is entirely antisocial that this sort of thing should continue and we certainly ought to do something about it. The Government so far have not given an answer. They themselves are responsible for forcing up interest rates, and they must be held—
§ The Deputy-Chairman (Sir Gordon Touche)
I am sorry to interrupt the hon. Member, but the question of interest rates was decided on the Amendment and we cannot go into it in detail now.
§ Mr. Leslie Hale (Oldham, West)
I want to catch your eye on this Question in a moment, Sir Gordon, and I want to deal with the point. Surely we are entitled to discuss on this Question whether we should now permit the Government to have the Clause, having regard to their refusal to accept the Amendment. The position is that the Bill charges the Government to lend money at rates encouraged by the present economic policy, and it would be my wish to submit to the Committee that in those circumstances this Bill should not be passed.
§ The Deputy-Chairman
We cannot discuss the Amendment which has been rejected by the Committee. The Committee has come to a decision on that.
§ Mr. Wheeldon
I was not trying to discuss the Amendment, Sir Gordon, which has already been negatived by the Committee. I was trying to discuss the important question of interest rates. As a matter of fact, I had almost concluded my remarks. I wanted to say that neither from the point of view of economics nor from the point of view of social matters is this policy justified. Therefore, we are entitled to make a demonstration on this matter and to show how working-class 1410 people and municipalities are being imposed upon today.
§ Mr. Hale
The point I ask the Committee now to consider is whether at this juncture the Public Works Loan Board serves a useful purpose, and whether there is any point in earmarking money to be lent by the Board under such restricted conditions and under such Government dictation as to interest rates that it fails entirely to fulfil the functions for which it was at first created.
The Financial Secretary will know that there have been many amendments and many amending Acts since the original Loan Commissioners were founded. He will also know that they were founded primarily for two reasons. One was that there were a great many institutions capable of doing a public good which were unable to obtain adequate finance. As one example there were little housing associations. As another example there were little educational foundations. The second reason was that they were rather at the mercy of mortgagees if they borrowed their money in the open market. They were open to the possibility of having their schemes frustrated by fluctuating interest rates. Therefore, it was felt that there were certain organisations working for the public good which should have, under Government control and direction, the benefit of Government finance.
That was really the original purpose, and I would say to the Economic Secretary that if he looks at the powers of the Public Works Loan Commissioners, which have not been amended in this respect, he will find they would have included, for example, the financing of voluntary schools. I suggest to the Financial Secretary that it is still well within the power of the Public Works Loan Board today, if it desires to do so, to undertake finance in this direction.
I venture to ask the Committee for a moment to look at one example of how this Bill will work and what its effects will be if we approve of it. I do not want to delay the Committee at this hour of the night, so I shall be brief. Neither do I wish to traverse ground which I have traversed before, particularly because I want to be courteous to the hon. Gentleman who has the Adjournment tonight, who is anxious to get on with it, and who wants to get home to bed.
1411 For a moment I will refer to Oldham, because it is twenty years almost to the day since I went up there to interview the Labour executive and was adopted as their Parliamentary candidate; and twenty years is a long time in a comparatively short and uneventful life. There I became acquainted, perhaps for the first time in detail, with the tremendous problem that confronted the local government body of a great industrial town which, with all its energy, its industry and brilliance, had suffered a long period of unemployment, had seen its major industry pass through a period of recession, and which had been unable to raise large sums by way of loans because the rate opportunities were too low, and, indeed, because it had not had very progressive corporations.
After five years in this House I had the advantage of making a little survey of what had happened in Oldham while interest rates remained at a reasonable level, and while it was possible for a progressive corporation to raise finance and to try to tackle problems which had been left untouched for so long. It was a moving experience.
I do not want to put this in a highly controversial sense. Most hon. Members will know to what I am referring. We visited the social institutions. There are still in Oldham houses built in the 'nineties, and there are still back-to-back houses. I beg hon. Members to remember this when they talk lightly about the housing programmes of 1945 and 1946. I remember the Mayor of Oldham coming to me in 1947 and saying, "Now we are getting finance, and building labour is available. Our priority No. 1 will be the abolition of pail closets." Sometimes these things sound funny when we talk of them in the spaciousness of Westminster, but this was in the main street of the town. For the first time we were able to take the buckets out of the closets and initiate a sanitary service.
The Medical Officer of Health for Oldham has said that there are 10,000 houses in Oldham which should be condemned. It is only the fact that the population was reduced in the bad days of unemployment that has made the housing situation there as tolerable as it is. At all events, with no land, drains or sewers outside the borough, we tried to tackle 1412 the problem. It will be within the knowledge of the Committee that the Labour Government laid many additional problems on local authorities. Many welcomed the burdens. They were given new powers to deal with grievances. They were enabled to provide schools for special children, and separate hostels for the aged, things which were almost unheard of.
Last Saturday I saw something in which Oldham leads the world, its separate housing for aged people. I saw a woman of 80, deaf, dumb and nearly blind, just able to read large print written on a slate, who is living by herself in a single, one-storey house built by the Oldham Corporation at low borrowing rates and completed just before the first big rise under the present Government. It is a model to the world. It is frequently visited and inspected, and gives joy to all who see it.
I will not trespass on the indulgence of the Committee, but will summarise what I have to say in a few sentences. I also visited a mental hospital which is still in a Dickensian building, a building which ought not to be used to accommodate the mentally sick, but there we have transformed the treatment. Men are turned out cured after an average of eight or nine months, whereas a few years ago there was not a knife and fork in the place for fear of people committing suicide, and people entered the place and never left it. Now we run dances there, and former patients go back to dance with those who are not yet cured. We have introduced a social life to the place.
All this was done because finance was made available. This enabled the work to be done by the corporation of a town which can never be wealthy, with an industry which has never been among the very highly paid ones. By these improvements the whole social scene was transformed, leading to goodness knows what dividends in decency, in creating a new feeling of progress, a new feeling of companionship, a new feeling of understanding in the community.
This year we examined what we could do. We knew we could not go on building houses at the current interest rates. We knew the people would never be able to pay the rents. Even now, when we have a long housing list, people who 1413 are offered three-bedroomed houses say, "We need three bedrooms, but we cannot afford them, no matter how great our need is." So we decided to put things in order of their priority. We knew that the town that had been going forward was now going back. Not an hon. Member from Lancashire will disagree with what I say. If any hon. Member doubts it, I will take him to Oldham and show him. Oldham is built on seven hills. I hope tomorrow to go to the only other town in the world that boasts of being built on seven hills.
§ 10.30 p.m.
§ Mr. Hale
No. What I say is true. We know that we are going back every year. I saw the chairman of the housing committee bearing the burden of trying to do something in these circumstances, so we said, "We will concentrate on schools. It is the major need. The schools are overcrowded."
We have denominational schools which were built thirty, forty, even fifty years ago for a limited population and which now, fifty years later, are accommodating more than twice as many pupils than they were built for. There are children who walk two or three miles to school across dangerous cross-roads. We have the land, the plans and we have allocated the finance, yet the Government turn down the lot.
The noble Lord who is now—
§ Mr. Hale
I will accept the noble Lord's invitation to deal with one point.
My hon. Friend the Member for South Ayrshire (Mr. Emrys Hughes), who always makes very important contributions to our debates, said that Damascus could borrow at lower rates than Edinburgh. In point of fact, we were told in Oldham that we could get our finance from abroad if we could import money, and get it cheaper. This is the Government who were to lend money to Colonel 1414 Nasser eighteen months ago, at half the price that they are lending money with which to build houses at Oldham. I think it is better to help Colonel Nasser to build dams than to drop bombs on him. But why was Nasser No. 1 priority and the Mayor of Oldham No. 16?
Why is it that interest rates in this country are going up while, at the same time, they are going down in every other country? We hear the financial experts say that Wall Street and the American Treasury's reduction in interest rates has come a little too late to deal with the difficult situation and that they ought to have done it sooner.
We have had the privilege tonight of hearing the Minister of Housing and Local Government, who, with his experience at the Treasury, speaks with authority on the matter. He announced his policy almost in terms of the Bible:For he that bath, to him shall be given: and he that bath not, from him shall be taken even that which he hath.The right hon. Gentleman then went on to say that the man who had it did not like all this; that giving him extra interest did him a lot of harm and that it might even result in a drop in the value of his securities, although the only securities that have dropped are Government securities.
I know it sounds silly—I thought it silly when I heard it—but it was not I, but the Minister, who said it. I thought it daft, and if that is what the Financial Secretary thinks, I agree with him. I am only putting it to him because he was not here when the pronouncement was made. Everyone will at least agree with the Minister of Housing and Local Government that no one likes paying high interest rates. If he is satisfied that no one likes receiving them, then it seems that the Government have an opportunity of achieving in a limited sphere the unanimity which they have never been able to achieve before.
§ Dr. J. Dickson Mahon (Greenock)
I can, I want to be as considerate to the hon. Gentleman who is to have the Adjournment as my hon. Friend the Member for Oldham, West (Mr. Hale) has been so far. In the short time that I propose to speak on the Question before the Committee, I intend to address myself to the part of the argument used by the Financial Secretary in defending the Clause against the Amendments.
1415 The hon. Gentleman mentioned that, despite the fact that the Clause operates on the basis of high interest rates, it has not meant that there has been a fall in the level of investment in the public sector. I do not wish to seek to refute that now. I am sure that on some other occasions other hon. Members more competent than I am may be able to do it very effectively. I merely want to draw the attention of the Financial Secretary to the fact that it is not the Government's intention in future.
All the arguments against the Clause sought to show that there would be a decrease in the volume of public investment, especially in housing. When the Financial Secretary argues, as he did tonight, that high interest rates do not discourage public investment, he runs completely counter to the declarations of his own Government about housing in the future.
I must remind the hon. Member that the Secretary of State for Scotland told us some time ago that we must expect the level of council house building in Scotland to drop in 1959–60 to 20,000 local authority houses. Proportionately, that is substantially greater than the drop being experienced in England and Wales. While I do not want to appear to wear parish pump clothes tonight, it is true that the housing position in Scotland is worse than that in the United Kingdom as a whole.
My own town builds, or tries to build, 500 houses a year. It has about 2,500 houses which are recognised as slums, as well as an enormous amount of overcrowding which can be compared in severity only with that of Glasgow. No matter what the political colours of its members, my local authority knows that it must continue to build at the rate of 500 houses a year if its housing problem is to be solved in the foreseeable future. If it builds 500 houses a year, no matter what party is in power, no matter what legislation it defies, no matter what obstacles appear, it will still take forty years to solve its housing problem.
If the Government have their way, we will have to bear our share of the burden of a reduction in the Scottish housing programme. If the Government propose to reduce local authority building in Scotland from 28,000 to 20,000 a year 1416 by 1959–60, then my town will build not 500 but 400 houses a year—and that in spite of the contention of the Financial Secretary that high interest rates do not discourage investment in the public sector of the economy. That may have been true in the past—although I doubt it—but, on the Government's own protestations, it will not be true in future.
If he deigns to reply to the debate, I hope that the Financial Secretary will deal with that argument. Is this the only mechanism which the Government will recognise for distinguishing between priorities, or are there no priorities? Is this the synthesis of the Government's philosophy? There are two towns near mine which are both reaching the end of their housing difficulties and I am very glad to say so, but they will not bear the same burden of sacrifice in their housing programmes which my town will bear and which most people in most parts of the United Kingdom will bear in different ways.
I put it to the Financial Secretary that it is clear that the sacrifices will not be equal, will not be fair, will not be just. There must be a more reasonable way of sharing the sacrifices and of ordering the priorities. My right hon. Friend the Member for Ebbw Vale (Mr. Bevan) once said that Socialism was the language of priorities. I hope that good social sense will be the language of priorities. While Conservatives do not believe in Socialism, I never like to think that they are completely devoid of social sense. If they have any social sense, they will be willing to find ways and means of trying to distinguish, even in the framework of their own monetary policy—and probably in a Bill like this—between various priorities.
I ask the Financial Secretary not to answer these arguments merely intellectually and dialectically, which he takes so much pride in doing. In his argument the Minister says that high levels of interest have not meant lowering the levels of investment in the public sector. That is an argument from the past; let us look to the future and to the Government's intentions.
I ask the Minister whether that is true in housing, and whether it is going to be true? If it is not, why cannot the Government find some other mechanism to make the allocation of houses more just? I speak for hon. Members on both sides 1417 of the Committee who represent areas in which the housing situation is bad when I ask why there should be a blanket of uniformity over the whole country which fails to distinguish areas that are badly off? It is unjust, and it is wrong for Ministers to pretend that it is just, as the Financial Secretary did when seeking to fortify the Clause against the Amendment.
My burgh council wrote to me yesterday asking me to protest. I contented myself with voting in the Division for the Amendment, but I felt compelled to rise on the Clause and to add my voice to those of other hon. Members speaking for local authorities all over England and Wales. I ask them to note that the Convention of Royal Burghs in Scotland has protested against this system, which is so socially unjust that it must lead to a deceleration of progress in the housing of the people.
§ Mr. A. J. Sparks (Acton)
The Financial Resolution would place £300 million at the disposal of the Public Works Loan Commissioners until the passing of the next Public Works Loans Bill, which is an annual event. I would ask the Minister whether it is proposed to maintain the normal practice and to produce next year a Bill authorising a further sum of money. It strikes me as odd that the Minister should ask for sanction to advance £300 million to local authorities when, I suspect, he does not undertake to advance anything like that sum. It is significant that the Minister, in moving the Second Reading of the Bill, said that in 1956–57 the amount of money taken up by local authorities from the Commissioners was £121 million. Why does the Minister want £300 million for this year?
Would he undertake that if we vote the £300 million it will be granted in the coming year in loans to local authorities upon application? I hope that the Committee will take particular note of the Minister's answer; he will give no such undertaking whatsoever. The policy of the Government has been to deny to local authorities the facilities which we, as the House of Commons, provided for them. What right has the Minister to do that? He has no right to ask for £300 million when he is only expecting to advance £100 million or £120 million. If the 1418 Committee decides that £300 million shall be advanced by the Commissioners on application, the Minister should carry out the wishes and directions of the Committee.
The right hon. Gentleman is getting this money with no intention of carrying out the purpose of the Act. The policy he is pursuing is to refuse local authorities funds that we vote for this purpose and he refuses on the basis of a very peculiar formula. Local authorities go to the open money market to borrow money and, when they cannot get a satisfactory loan in that market at a rate of interest they regard as satisfactory, they go to the Public Works Loan Board and ask for the money.
The Board says, "We do not care what you want the money for, you may be starving for houses, or for roads or schools or a whole host of things, but we do not care two hoots. What we want to know is what you have done to get the money in the open money market." If the local authority says it has done its best to get money at a rate of interest it regards as reasonable, the Board says, "In our opinion you have not sufficiently pledged the credit of your authority."
When asked what it means by that, the Board cannot say, but the inference when local authorities are confronted with a refusal by the Board is that the authority has not been prepared to take out loans at 6¾ per cent. or 7 per cent. Therefore, the Minister is exercising pressure on local authorities to drive them into the open money market to take up loans at the highest rate of interest that prevails.
On the Second Reading of the Bill, the hon. Member for Canterbury (Mr. L. Thomas) made an interjection in a speech made by an hon. Member on this side of the Committee. He seemed rather puzzled. As far as I remember, the hon. Member for Canterbury said, "Are you trying to infer that local authorities are borrowing at short term to finance long-term projects?" The answer is "Yes, they are." Quite a lot of local authorities are financing long-term projects on the basis of short-term loans and some of them are likely to be in grave difficulties in the next few years if the money market fluctuates considerably. If those 1419 who finance money on short term want their money back quite a few local authorities will not be able to provide it. In an event of that kind they hope the Minister would come to their rescue.
Because they cannot get advances from the Public Works Loan Board, local authorities are being driven by officials of the Board to go to the open money market. They do not know whether the present rate of interest is likely to be stabilised for a time. It would be disastrous for the country if it were. The chances are that the Bank Rate and the rate of interest charged for loans in the open market may come down. We cannot see them going up very much higher. If they do, they will bring disaster to the economy of the nation. Therefore, local authorities cannot afford to undertake long-term loans at the prevailing rates of interest of 6¾ per cent. and 7 per cent. They cannot saddle their ratepayers with a burden of that kind for twenty, thirty, forty, fifty or sixty years. They are driven to the open market to take up short-term loans at very high rates of interest. The interest on die two- or five-year period at present is 7¼ per cent.
If the Minister carries out the desires of the House, we hope that some of the money involved in the Clause will go to people who want to buy their own homes. Many people next year will be put out of their houses by the Rent Act and will have nowhere to go. They may be faced with the prospect of having to buy the house in which they live or be put out on the streets.
The Minister of Housing and Local Government has been at some pains to obscure this problem of the burden of interest rates on such persons who will have to pay and of the facilities provided by local authorities of which such displaced tenants may hope to take advantage. In the debate on the housing situation the other day the right hon. Gentleman made a statement which was thoroughly misleading. He said that people who want a home of their own can go to local authorities and get an advance of 90 per cent. of the valuation of the house and in certain instances 95 per cent.
That was true up to about two years ago, but the number of authorities who 1420 are doing that at the moment is very small, and soon there will be none at all. They cannot afford to take out long-term loans at the present high rate of interest and re-lend the money under the Small Dwellings (Acquisition) Act or the Housing Act, 1949, saddling themselves for many years with a high rate of interest and lending the money to borrowers who want to buy their homes.
What would be the position in a year or two if the rate of interest dropped from 7¼ per cent. to, say, 5 per cent.? At the moment, the authorities have to pay 6¾ per cent. for long-term loans and 7¼ per cent. for short-term loans. Let us assume, for argument's sake, that the rate falls from 6¾ per cent. by 2 per cent. to 4¾ per cent. What will the borrowers do? They will not continue, for twenty years or more, to pay 7½ per cent. interest on the money which they have borrowed from the local authority. They will go to another source, where they can get the money at 4¾ per cent., and they will pay back to the local authority the outstanding debt on the house.
When the local authority has the money paid back to it, what will it do? It cannot repay it to the people from whom it was borrowed, because it was borrowed for periods from ten, fifteen to twenty years. The authority will have to hold this money at 6¾ per cent. for the whole period of the loan. A treasurer of any local authority would not be so unwise or so unjust to his ratepayers as to saddle a local authority with long-term loans at 6¾ per cent. and run the risk of having a lot of the money repaid because owner-occupiers were able to borrow later from another source at a lower rate of interest. Local authorities are driven to borrow short-term in the money market at the much higher rate of interest of 7¼ per cent.
I said just now that the Minister of Housing and Local Government was trying to confuse this question of high interest rates for house purchase. He has recently been urging local authorities, if they are to advance money for house purchase, to do so under the Housing Act, 1949. In Circular 54/57, which he has issued to local authorities, there is a paragraph which runs as follows:The Minister reminds local authorities that they have power to make loans for house purchase; and he will he willing to consider new 1421 or revised schemes which will provide for a varying rate of interest on advances under the Housing Acts.Some of this money will be going for that purpose, but I would ask the Minister what, precisely, is meant by that paragraph.
The idea is to try to safeguard the owner-occupier if he borrows money at 6 per cent. and the Bank Rate goes down. With a varying rate of interest he will then reap the advantage, but the local authority will be left stranded. There is no provision for a local authority being able to receive its loans at a variable rate of interest. No one in the open money market today will advance money to local authorities on the basis of a varying rate of interest. We know that until the present scarcity of money the practice in some cases has been for lenders to include a break clause that after the first seven or ten years the local authority may repay the loan. But local authorities cannot borrow money on such terms today; such loans are not to be had. While high interest rates prevail in the open market every lender wants to lend his money at that high rate for as long as he possibly can.
Unless local authorities can get their loans advanced to them at a variable rate of interest they cannot pass on anything of that nature to the people who borrow money from them to buy their homes. So, once again, we come back to the position I tried to illustrate just now, in which the local authorities, upon repayment of outstanding mortgages, will be left with sums of money carrying very high rates of interest which they cannot repay until the expiration of the loan.
This question needs serious examination, if the Government are anxious to do something to help people who want to buy homes of their own. If they really want people who will be put out by the provisions of the Rent Act next year to be able to buy their own homes, it is their duty not only to request the Public Works Loan Board to advance this £300 million to local authorities, but to advance it at a reasonable rate of interest, the benefit of which will be received not only by the local authorities but by the people who borrow that money from them.
Once again, I ask the Financial Secretary to give an undertaking to the Com- 1422 mittee that the £300 million which we are voting for him and the Government tonight will be disbursed by way of loans to local authorities during the forthcoming year, or will he tell the Committee whether the rate of advance to local authorities last year by the Public Works Loan Board of £121 million is to be approximately the rate of advances this year? It will probably be less than that if present policies continue. The Committee, therefore, should know what he proposes to do with the money. If he does not intend to advance this amount to local authorities, he ought not to come to the Committee to ask for it. On the other hand, if he asks for the money, and the Committee agrees to provide it, then it should go to the local authorities, the people we are speaking for tonight.
§ Mrs. Joyce Butler (Wood Green)
I sit on the finance committee of a local authority, and I am, therefore, very well acquainted at first hand with the enormous difficulties which local authorities are facing in financing their work at present. They are finding it an increasing burden, and more and more they are seeking, as some of my hon. Friends have said, to find ways in which they can decant some of their responsibilities and devote their energies to those tasks which seem to them most important. My hon. Friends have already said that many authorities have suspended loans for house purchase. They have done that not because they regarded these loans as unimportant, but because of the intolerable financial conditions under which they have to carry out their functions.
I hope that the Financial Secretary will deal with the point made by my hon. Friend the Member for Acton (Mr. Sparks), that it is not sufficient to do as the Minister of Housing and Local Government has done and say that he will welcome and consider schemes for varying rates of interest to borrowers. It is necessary to consider, also, the point my hon. Friend made about the possibility of varying rates of interest to local authorities. If the hon. Gentleman cannot answer tonight, I hope that he will seriously look into the matter. It is the only thing which will help local authorities to continue making loans for house purchase, and such loans are more than ever important today.
1423 The particular point I wish to refer to concerns the figures given in the Report of the Public Works Loan Board. There is a figure given of 7,414 applications for loans totalling £128 million, of which 7,182 were approved, for a total of £94 million. That is a misleading figure, giving a quite incorrect picture of the needs of local authorities for loans. Especially where local authorities are in the London area within easy reach by telephone of the Public Works Loan Board, it has become the practice, when an authority wants to borrow, for the treasurer, before making a formal application, to telephone and speak to an official of the Board, asking what are the prospects of being able to borrow whatever sum it may be. The official will reply, "It is quite hopeless; it is no good making the application. You must try on the open market."
I suggest, therefore, that this figure is completely misleading, because the applications shown as having been made are, in the main, applications made after treasurers have ascertained that the Board will grant them. There are, of course, some which are not, from local authorities a long distance from London; but, in the main, local authorities do ascertain, before making formal application, whether they are likely to get the money or not. If we could have the correct figure of the sums which they have informally asked the Board to provide, a very much greater total would be shown.
Reference has been made to all the responsibilities of local authorities. I wish to refer to a new responsibility which is dealt with in a recent circular from the Ministry of Housing and Local Government to local authorities concerning housing accommodation for old people. In that circular, which many authorities will not yet have considered, the Minister points out thatSome old people may be affected by the decontrol provisions of the Rent Act, and a number may have, within the next twelve months, to find accommodation better suited to their means. While some who may find themselves in this position will no doubt be able to make their own arrangements, there may be others who will need help and may well look to their local authority for it.That is an additional burden placed on local authorities, who already do not know how to finance the projects they 1424 have in hand. The Minister goes on to recommend thatThey should also consider the possibility of acquiring and converting suitable existing properties,that they should make available grants and loans to owners to carry out conversion schemes, and that they should bewilling to purchase by agreement any suitable larger houses belonging to old people who would like to become tenants of small council dwellings.He adds thatLoan sanction will be available for proposed purchases.He does not say anything about loans being available through the Public Works Loan Board. He does not say anything about loans being available at a reasonable rate of interest.
Is it not quite monstrous that the Government should set free the landlords and enable them to ask extortionate rents and to sell their houses for any price that they can get and to lay the responsibility for rehousing the tenants thus evicted on the local authorities, to ask them to purchase houses to house these people, to refuse them loans through the Public Works Loan Board and to insist upon local authorities going on the market, paying these high rates of interest and coping with all the difficulties that that involves because the Government have laid upon them this responsibility which they have deliberately created? This seems to me a quite intolerable imposition on local authorities.
Unfortunately, the Minister knows perfectly well that he is quite safe in laying this burden on local authorities, because he knows that they are public-spirited and will do their best to rehouse these unfortunate elderly people. Surely, in laying this responsibility on local authorities, the least that the Government can do is to see that the money is available through the Board for this purpose and that it is at a reasonably low rate of interest. To do otherwise is most unfair.
I hope that the Government will look again at this suggestion that they are making and see whether there is not some way in which they can help local authorities to carry out this additional burden without demanding from them such enormous financial sacrifices as they will have to make.
§ Mr. Lindgren
The first point which I should like the Financial Secretary to the Treasury to deal with in a little greater detail than he was able to do at an earlier stage is his statement, which I found quite remarkable, that the higher the rate of interest the greater is the degree of investment. I understood him to say that the rate of investment by public authorities is higher now than it was when we had a Labour Government with rates of interest of 2 and 3 per cent.
I have always understood that the Government's reason for putting up the Bank Rate has been to restrict capital investment. The hon. Gentleman's statement, however, suggested that the higher rates of interest imposed by the Government have tended to create an inflationary situation because of a greater degree of public investment. His reply might be that the control by the Labour Government over the field of activity in which local authorities participate meant that there was less actual money spent on housing, sewerage, roads, and so on, during that period. I tell him frankly, on behalf of the local authorities, that they would much prefer a low rate of interest with a restricted field of capital investment to a high rate of interest and inability to engage in any investment at all. What it means now is that local authorities are completely unable to enter the field of investment, of desirable public health investment, housing and so on.
The Financial Secretary said that local authorities which can now borrow on their own credit can go to the open market. He rightly said that three-quarters of them now have to go to the open market rather than to the Public Works Loan Board. It is true that the larger authorities can raise money on the open market. On Second Reading, I referred to Nottingham City Council, a local authority of good repute, which was able to raise more than it wanted on the open market at a lower rate of interest than that being asked by the Board for money lent to minor authorities.
The credit of the local authority in no way determines the rate of interest which it has to pay. The big complaint of local authorities is the fact that they are forced to go to the open market, and can go to the Board only if they are such a small authority that they cannot get 1426 money on the open market. This means that the Board's rate becomes a stepping-off rate for the open market's interest rates. In the old days a local authority which could go to the open market or the Board could play one off against the other, accepting the loan from the one with the lower rate. Local authorities, particularly the smaller urban and rural authorities, now cannot go to any broker and get money at a rate lower than that of the Board. Thus, whereas previously the Board's rate was the ceiling, it is now the stepping-off ground for the open market.
I am not in any way criticising the Financial Secretary in my next remarks. On Second Reading, one or two points were raised to which he did not reply. He was willing to reply, but he was prevented from doing so by one of my hon. Friends, who objected to his speaking twice. Therefore, I again put one of the points to the hon. Gentleman.
The situation brought about by the Government means that local authorities going to the open market can be divided into two classes. County councils, county boroughs and municipal boroughs of over 50,000 population are automatically trustee stock authorities, which gives them a wide range of activity. But the field of activity of urban and rural district councils and municipal boroughs of under 50,000 population, whose resources are less than the others, is automatically restricted, because they are not trustee stock or trustee security authorities.
Therefore, trustee savings banks, and the large number of superannuation schemes, and administrators restricted to dealing in trustee stock, simply cannot lend to these small urban and rural authorities even if they so wish. I submit that it is more than a point for consideration by the Government if it is to force local authorities on to the open market. The Government should put them all on the same level and make them what I would term trustee securities.
I would like to turn now to the point of the sixty-year period and the flat rate of interest. Previous discussions with financiers and representatives of the Public Works Loan Board have always convinced me that, in making a loan for a long period of years, there should 1427 be an assessment of what the market will be over the whole of that time, charging the rate of interest to cover that period. It seems strange to me that the actual rate of interest charged is the rate obtaining at the time when the loan is granted.
Why we should saddle local authorities, be it in connection with housing, sewerage, or water schemes, for example, with a charge which means that people fifty years hence will still pay 6¾ per cent., is something I cannot understand. Because the Government have got themselves into financial difficulties and have had to bring the Bank Rate up to 7 per cent. is no reason for saddling people many years from now.
Where the justification is for that I just cannot see. As I said during the Second Reading debate, I came into local government in the early 1920s and the local authority with which I was associated had to deal, not only with the money for day-to-day jobs, but pay 6½ and 7 per cent. from the rates for activities in the 1970s and 1980s. Some of the money borrowed in 1919 and 1920 is still being paid for at 6¾ per cent., and it is to the credit of a Labour Government, and to my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) that, during his period as Chancellor of the Exchequer, interest rates were lowered from what was then being charged on Public Works Loan Board money to 4½ per cent. for long periods.
If we are concerned with a temporary expedient now—one which the Government do not want to continue and which nobody in the country wants to continue—why should we, on this £300 million, saddle local authorities with a very high rate of interest for, say, sixty years? Surely the Government can give some indication that the rate will be varied in accordance with the Bank Rate as that operates from time to time.
The last point I wish to make is one with which I dealt on Second Reading, but to which the Minister could not give a reply. My hon. Friend the Member for Acton (Mr. Sparks) has referred to it tonight, and it is that local authorities are worrying because of the considerable sums of money which are out on seven days' call. They have done that, to some 1428 extent, to meet the hardship likely to arise from long-term borrowing and, as I have pointed out, the saddling of future generations. Because the Bank Rate has not gone down they borrowed at six months and then seven days' call, and the amount on seven days' call is now very considerable. I know of one comparatively small urban district council which has well over £½ million at the moment on seven days' call.
I grant to the Financial Secretary that if there were a call on that short-term money no Government could stand by and see local authorities in default. It would be some assurance to local authorities if it were stated on the authority of the Financial Secretary that some of the £300 million that we are making available to the Public Works Loan Board would be available to local authorities in the event of their getting caught on the seven days' call—if, in fact the money is called in quickly. As I have said, that is particularly important as the previous arrangements which they had with the banks for bridging loans to cover the period until they could go to the open market and find cheaper money are to be stopped by the banks on the instructions of the Government.
I hope that we shall get a reply from the Financial Secretary on some of the points which we have raised before we pass the Clause.
§ Mr. Powell
The hon. Member for Oldham, West (Mr. Hale) reminded the Committee that the Public Works Loans Board was originally brought into being to provide a recourse for local authorities which were unable or which found it otherwise difficult, to raise capital for their operations. Today the Board is still performing that function as a means of recourse for local authorities in that position, and it is for that reason that I feel confident that the Committee will agree to renew the lending powers to the extent set out in the Clause.
The hon. Member for Acton (Mr. Sparks) asked me about the speed with which the money would be called upon. The existing £300 million which was provided by the Act which received the Royal Assent at the beginning of August, 1956, would at the present rate have run out next July, and, equally at the present rate, the limit which will supersede it and 1429 which is provided for in the Bill, will be reached in about 20 months' time. Therefore, it is quite unrealistic for the hon. Member to say that facilities are being provided of which the Government are preventing local authorities availing themselves.
§ Mr. Sparks
What did the hon. Gentleman mean by his statement when moving the Second Reading of the Bill that last year only £121 million went to the local authorities? Was it more?
§ Mr. Powell
I gave several figures representing total advances for different periods. If the hon. Gentleman will work out the averages he will find that the weekly or monthly rate of lending over the last year or two accords with the figures which I have just given.
§ Mr. Powell
The hon. Gentleman raised the problem of a local authority lending money for house purchase when faced with repayment by the mortgagor in the event of interest rates changing. Let me take the two cases. Suppose the local authority has borrowed the money which it has advanced in that way from the Public Works Loan Board. If the borrower wishes to repay the capital prematurely then the Board will accept premature repayment without charging any premium—[Interruption.] I am dealing with the two cases. In the case of borrowing from the Board there is no need for the local authority to feel anxiety on that score. Where the money is borrowed on the open market, as the hon. Member himself and many other hon. Members who have taken part in the debate have pointed out, the local authorities are, in fact, borrowing for comparatively short periods. That fact, combined with the general and well-known fact that their total local loan fund is charged not at the marginal current rate but at a much lower average rate provides them with sufficient cushion and resilience to meet the repayments which, I agree, may be expected as interest rates fall.
The hon. Lady the Member for Wood Green (Mrs. Butler) suggested that the figure of applications received and accepted by the Public Works Loan Board and mentioned in the Board's Report was 1430 phoney in that it did not take account of applications which had never been formally made because the local authorities had, in accordance with Government policy, been directed elsewhere, namely, to the market.
§ Mr. Powell
The hon. Lady will realise that unless those authorities succeed in meeting their requirements on the open market they would have to go back to the Board, and that it is that picture of the Board performing its function as a recourse of local authorities who are unable to borrow satisfactorily on the open market which the figure provides.
§ Mrs. Butler
They were told that it was no good going to the Board because they would not get the money.
§ Mr. Powell
I am not prepared to believe that if a local authority tries to raise money on the open market and fails it does not go back to the Board and make its application. Of course, it is within the knowledge of all of us that that happens.
§ Mr. Sparks
The hon. Member does not seem to realise that local authorities have done exactly what he has said and the officials of the Board have refused point blank to let them have the money.
§ Mr. Powell
Surely the figures which the hon. Lady quoted from the Board's Report prove the contrary.
I want to deal with two or three questions put by the hon. Member for Wellingborough (Mr. Lindgren). He was quite right to draw attention to the anomaly which exists at the moment between local authorities whose issues are trustee stock, and who thus have an advantage in obtaining access to investable capital, and those whose stock is not of trustee status. He may have overlooked the fact that that will be put right by the Local Government Bill now before Parliament. He will find that Clause 50 of that Bill removes that anomaly and so meets that point completely.
He asked about the relation between the period for which the loans are made by the Board and the amortisation period of the capital investment in respect of 1431 which the loan is given. There is now no connection between the amortisation period and the period for which the Board will make an advance, subject to a minimum of seven years below which the Board will go only if the amortisation period is less than seven years. Subject to that minimum, the Board will lend for periods shorter than the amortisation period of the capital projects.
He referred to the proportion of seven-day call money which local authorities held at present. I agree that that is an important consideration and a careful watch is kept upon the level of seven-day money which is held by local authorities. I can assure the Committee, that the available figures tend to show that the proportion, taken generally, is very low and that there is no reason to feel anxiety about the proportion of seven-day money held.
§ Mr. Sparks
Does the hon. Member agree that it depends on the time the Bank Rate remains at its present figure? The longer it remains there, the higher must be the short-term borrowing.
§ Mr. Powell
I am not sure that I quite follow the hon. Member's meaning.
The Clause in itself does not involve the rate of interest. It would remain valid whatever were the movement of the Bank Rate and of the Public Works Loan Commissioners' rate, during the period which the Royal Assent to the Bill would open. But I hope I may be allowed briefly to refer to the remarks made by the hon. Member for Small Heath (Mr. Wheeldon) and the hon. Member for Greenock (Dr. Dickson Mabon). It is true that the Government, through loan sanction and other means, have control of the projects, and of the total amount of the capital projects, in which local authorities engage sand that, as the hon. Member for Greenock said, the Government have many methods at their disposal of influencing priorities. Within the last year or two we have seen a shift in priority in many fields of local authority investment. There has been a shift of emphasis from general housing to housing for the purpose of slum clearance. It is not in that context that the policy governing advances from the Public Works Loan Board belongs; that policy is concerned with the sources of 1432 capital for investment, and I close by reminding the Committee that the obligation of the Government is to ensure that the capital investment of local authorities is met by genuine savings and is not provided by inflation. This is done by ensuring that the majority of that investment is met upon the open market and that the remainder is met by the Public Works Loan Commissioners at rates of interest which correspond with those ruling on the market outside.
§ Question put and agreed to.
§ Clause ordered to stand part of the Bill.
§ Clauses 2 to 5 ordered to stand part of the Bill.
§ Schedule agreed to.
§ Bill reported, without Amendment; read the third time and passed.