§ Mr. J. A. Sparks (Acton) rose—
§ 10.0 p.m.
§ Mr. Speaker
Before the hon. Member begins to move the Motion standing in the name of his hon. and learned Friend the Member for Kettering (Mr. Mitchison), may I say that I have looked at the Motion and also at the one which stands in the name of the hon. Member for Hamilton (Mr. T. Fraser) and that they both appear to me to be in identical terms? I was wondering whether they could be discussed together. If that is agreeable, I think that it would be for the convenience of the House.
§ Mr. Sparks
It would suit us quite well, Mr. Speaker, to take both Motions together.
I beg to move,That an humble Address be presented to Her Majesty, praying that the Acquisition of Land (Rate of Interest on Entry) (No. 2) Regulations, 1958 (S.I., 1958, No. 1803), dated 29th October, 1958, a copy of which was laid before this House on 4th November, be annulled.These Regulations are concerned, in the main, with the procedure adopted by local authorities for the acquisition of land for their own purposes. The local authority first serves a notice to treat upon the owner, and then serves a notice of entry, leaving the compensation which has to be paid for the land for settlement at a later time. When, finally, the amount of compensation is agreed, the local authority is responsible for paying a rate of interest upon that compensation money which is back-dated to the date of the notice to treat.
The Regulations before us reduce the rate of interest to be paid upon the backdating from 6¼ per cent. to 5½ per cent. We think that the reduction is inadequate. We believe that 5½ per cent. is too high. It is important to realise that this procedure for the acquisition of land under Section 57 of the Town and Country Planning Act, 1947, is extensively used by local authorities, first, in slum clearance schemes, in redevelopment under the planning Acts, in housing schemes and also for many other purposes.
Therefore, we may ask to what extent land purchases by local authorities are 1315 made in this connection. I doubt whether the hon. and learned Gentleman is in a position to give us an exact figure, but the Minister of Housing and Local Government has made an estimate of the amount spent by local authorities on the acquisition of land in 1957–58. This estimate appears in the Financial Memorandum to the Town and Country Planning Bill, which is now upstairs in Standing Committee.
The Minister of Housing and Local Government estimates that in 1957–58 local authorities spent £33 million on the acquisition of land for their own purposes. It is also estimated that, as a result of that Bill, if it becomes an Act in its present form, the cost of the acquisition of land to local authorities on this figure of £33 million will be increased by a further £8 million, giving us a figure of £41 million, which is estimated to be the amount which local authorities would spend on land purchases in 1957–58.
I have endeavoured to arrive at an estimate of the amount of interest payments involved in connection with these Regulations, and I think it must be said at the outset that it is quite impossible to get anything like a near figure. But we can obtain some sort if picture of the liability upon local authorities for interest charges if we take the estimate of expenditure of £41 million for land in 1957–58. Assuming, for instance, that 5½ per cent. interest was paid on this sum for a whole year, the amount of interest payments would be £2,255,000.
Of course, that would be a high figure, I admit, and it would not be a realistic one, because the expenditure upon land is not embarked upon in the first month of the year but is spread throughout the whole year, and, obviously, in the course of one year the full rate of interest would not fall upon this amount. But if we assume that for six months of the year this rate of interest was applicable to land purchases we should have a figure of £1¼ million, which local authorities can be assumed to have to find in interest payments. If the Financial Secretary is able to correct us on that figure and give us a more realistic one I am sure that we shall be very pleased to hear what it is.
It is known that in cases of this kind, where local authorities enter into possession by serving a notice of entry, the 1316 amount of interest back-dated from the time that compensation has been agreed varies very much from a few weeks to perhaps six months or nine months, or more, according to the Financial Secretary; and in many cases where there is disagreement and the matter is referred to the Lands Tribunal it may well be twelve months. So I think that we can say that the cost to the local authorities is about £1 million a year, taking the figures for 1957–58.
We believe that this is too large a sum to call upon local authorities to pay in interest charges, but I should like to ask the Financial Secretary why the Treasury has arrived at a figure of 5½ per cent. interest to be charged to local authorities for this purpose when, at the same time, the Treasury has reduced the Bank Rate to 4 per cent. It seems a most extraordinary proceeding to have the Bank Rate reduced to 4 per cent. and yet to maintain an interest rate of 5½ per cent. to local authorities in interest payments of this kind.
I should like to draw the attention of the Financial Secretary to another Order, the contents of which I cannot discuss this evening except to say that under the Opencast Coal (Rate of Interest of Compensation) Order, No. 1804, the Coal Board pursues a very similar procedure to the local authorities in connection with opencast mining. For instance, it also enters into possession of land, leaving the amount of compensation to be settled at a later date, and, when it is finally settled, then to pay a rate of interest upon the compensation money back-dated to the date when it entered into possession. In this case, the Treasury proposes that the Coal Board need pay only 4½ per cent. interest. We feel that that is a far more realistic rate than 5½ per cent., which is the rate charged to local authorities.
Why should there be this distinction? After all is said and done, looking at it in another way, why should the owner of land purchased by a local authority receive a rate of interest I per cent. higher than the rate received by an owner of land taken by the Coal Board? If there is any equity in this matter at all, I should have thought that the rate in both cases should be about the same. The rate of interest which the Coal Board is to be called upon to pay is a realistic one, and the local authorities should be called upon to pay about the same figure.
1317 Can the Financial Secretary tell us why 5½ per cent. has been fixed for local authorities, when Bank Rate has been reduced to 4 per cent.? Will he not reduce the 5½ per cent. to the figure charged to the Coal Board, namely, 4½ per cent.?
From 1947 until 1951, during the time of the Labour Government, the rate of interest charged to local authorities for purposes of this kind was 3½ per cent. It was not until hon. Gentlemen opposite returned to power that they, in March, 1952, increased the rate of interest to 4½ per cent., and, at later stages, increased it to 6½ per cent. Here they propose to reduce it to 5½ per cent. The interest rate to be paid by local authorities, even on the present basis of 51 per cent., is 2 per cent. greater than it was during the whole period of the Labour Government.
Why have the Government chosen to maintain so high a rate of interest in present circumstances? Rates of interest are falling, and we feel that local authorities should be entitled to receive a benefit from the decline in interest rates far greater than is proposed by the Treasury here.
We do not intend to divide against the Regulations, because we cannot divide against a concession which the Treasury is giving to local authorities. At the same time, we register a most emphatic protest that the reduction is not sufficient. It is not in line with the general downward trend in interest rates. In view of the many burdens which local authorities have to shoulder, and the ever-increasing expenditure which falls upon them and their ratepayers, we feel that this rate should be still further reduced.
We shall not complain if the Financial Secretary says that he thinks there is a case for reducing the rate of interest from 5½ to 4½ per cent. or even, if he wants to compete with the Labour Government, to what it then was, a 3½ per cent. figure. So, in moving this Motion, I look forward with some interest to the Financial Secretary's response to our appeal and to hear what justification he has for this differential between the Bank Rate and the Coal Board regulations, on the one hand, and, on the other, the present Regulations which we are praying against. What is the justification for maintaining this differential in these figures, when we 1318 believe that with the general downward trend 5½ per cent. is too high and that it should be brought down to a much lower figure?
Any concession that the hon. and learned Gentleman is able to make in this matter will be of considerable importance, although the amount of money is not exceptionally large. Nevertheless, if the figure is about £1 million a year, which. I think, it would be, it is a fairly substantial sum of money, and if a large part of that is saved by the local authority, by a reduction still further of the rate of interest, the advantage of that reduction will go to the local authority in financing the costs of many of its services, including slum clearance, redevelopment and housing.
I therefore do hope that what I have said will convince the hon. and learned Gentleman that something needs to be done to reduce this rate of 5½ per cent. to a more realistic figure.
§ 10.17 p.m.
§ Mr. James McInnes (Glasgow, Central)
I beg to second the Motion.
There are one or two points I should like to add to those made by my hon. Friend the Member for Acton (Mr. Sparks). Unlike my hon. Friend, I am not in possession of the information which has been made available to him through the Ministry of Housing and Local Government about the volume of the land which has been acquired by local authorities over a given period, nor that about the amount of money involved in respect of land of which the local authorities have entered into possession without paying compensation.
However, that is nothing unusual for a Member from Scotland, because the Scottish Office is absolutely bankrupt of statistics. I have taken the Scottish Office to task so often in the House. Indeed, not long ago I was able to reveal that statistics for seven years had not been published. The Joint Under-Secretary himself confessed to that failure. So I am at that disadvantage tonight in not being in possession of knowledge of that kind.
Like my hon. Friend the Member for Acton, I want to know just precisely—because I confess my ignorance—what is the relationship between the Bank Rate and the rate of interest laid down in these Regulations.
1319 We know that in the last four years the Bank Rate has fluctuated on no fewer than eleven occasions. I wonder whether there is any relationship between the rate of interest provided for in these Regulations and that operating under the Public Works Loan Board, where fluctuations have occurred on no fewer than eighteen occasions since the Government came into power. I should like to know exactly what the relationship is. I find that similar Regulations were laid on 17th July when the rate of interest was reduced from 7 to 6¼ per cent., and on this occasion it is sought to reduce it to 5½ per cent.
Why must we relate the rate of interest, if we do, to either the Bank Rate or the Public Works Loan Board rate? Would I not be correct in asserting that the compensation which is outstanding would 1320 be payable at least within a period of three years? I thought I heard the Financial Secretary indicate to my hon. Friend, when he suggested nine months, that it would be longer. If what I say is the case, why do not the Regulations make some provision for charging interest at the rate which would be in operation in respect of borrowings for short-term loans? Borrowing for short-term loans is much cheaper than borrowing over a much longer period, and three years is one of the periods provided for in short-term borrowing.
I hope that the Financial Secretary will refer to some of the issues which I have raised, but I am not overlooking the obligation of the Joint Under-Secretary of State for Scotland, and I also hope to hear from him about his omissions and failures in this matter.
§ 10.23 p.m.
§ Mr. G. R. Mitchison (Kettering)
I support the English Prayer. If we had had the Scottish Prayer formally before us I should have done the same with that.
We are concerned here with a fairly simple matter. We are not called on to discuss the general question of the excessively high rates of interest which we believe are charged to local authorities. What we are considering is the rate to be paid when a local authority compulsorily acquiring land enters it and has to pay interest from the date of entry until the date when compensation is agreed or assessed and paid. I think we can safely take it that that is a period which will probably be a good deal less than a year, but it is unlikely to exceed a year. No doubt the Financial Secretary will correct me if there are many cases of longer duration than that, and will also give us some idea of the amount of money involved, for I feel sure that he would not authorise the issue of Regulations of this kind without knowing the extent of the burden they laid on local authorities in the course of a year.
One can look at this matter in several ways, but one might begin by looking at the question of time. These Regulations were issued on 29th October, 1958, and were signed, as always in these cases, by two of the Lords Commissioners of Her Majesty's Treasury, presumably, as the phrase goes, "in their own hand". Probably on the same day they signed the Order about opencast coal, which is exactly similar as a case. It is true that what is being acquired there is compulsory rights of occupation, but again the payment of interest is to be made over the period from entry or occupation, whichever one likes to call it, until the assessment in the terms of the Act. In that case it is not always a legal assessment, but it is until the final determination. We are therefore dealing with comparatively short periods.
On 20th November, the Bank Rate was reduced to 4 per cent., but no change has been made in the Regulations. I suggest to the Financial Secretary that he might take that matter into account. What we are here considering is not the kind of loan that comes from the Public Works Loan Board, which is usually of considerably longer duration and 1322 might well run up to forty or sixty years in the case of the purchase of a house.
What we are here considering is money loaned for a short period. Present bill rates are about 3½ per cent. for Bank bills and a little over 4½ per cent. for fine trade bills. We know that money can be borrowed from day to day much more cheaply than at the Bank Rate, and this is a different sort of transaction from a long-term loan. The prices of short-dated securities in the market fall somewhere between the very short rates of hills and the somewhat higher rates at present ruling for longer term loans. Therefore, some allowance ought to be made for the fact that these are quite short-term loans.
There is another way of considering the matter. Let us suppose that the person who is to get this compensation is remarkably "broke" and has to get a bank overdraft. With the change in the Bank Rate, the rate on his hank overdraft will have fallen. There are few people nowadays—although the man who is completely broke might be one—who would have to pay 5½ per cent. on a bank overdraft. The current rate on a good bank overdraft is about 4½ per cent., and that is very much nearer the mark than this rate.
Let us consider the matter from the point of view of public advantage, because even the Treasury ought to do that, and I hope from the smile on the hon. and learned Gentleman's face that in fact it does do so. The position is that if local authorities are discouraged from entering a piece of acquired property until the compensation can be assessed, during the interval there is a remarkably inconvenient state of affairs which does no good to anybody.
A local authority cannot compulsorily acquire without Ministerial leave—at any rate I cannot think of an instance, and certainly in the vast majority of cases Ministerial leave is required. By the time the local authority enters the property it will have had Ministerial leave to acquire compulsorily and Ministerial leave to make an early entry, and it could not get those leaves if it were not for the good of the community that it should not only carry out the acquisition but proceed with it immediately.
1323 Those are the most obvious reasons, and it can serve no possible purpose to hold up the work of local authorities because they fail to pay what I regard as an excessive rate of interest over the period between entry and determination of compensation. On public grounds, there is every advantage in keeping this rate as low as possible.
I have an idea of what the hon. and learned Gentleman will say about the opencast coal case. He will say that it is quite different, that there is somebody else behind it, and that there are special relations between the Treasury and the Coal Board, or something of the sort. After all, the point is a simple one. My hon. Friend the Member for Acton (Mr. Sparks) put it very clearly. He made his first speech from the Dispatch Box in a manner which attracted the admiration of us all.
§ The Financial Secretary to the Treasury (Mr. J. E. S. Simon) indicated assent.
§ Mr. Mitchison
I am glad to see the hon. and learned Gentleman nodding agreement with me.
If fairness is the test, is it fair that a man whose land is being occupied under the compulsory powers of the National Coal Board should get the advantage of a lower rate of interest, while the man whose land is acquired by a local authority should receive a higher rate of interest? Surely, the fair thing to do is to look at the market value, as the Government are constantly urging us to do. For money for a short period we should take the test of the money market or of the overdraft; or we should have regard to the fall in the Bank Rate and say that in ordinary good sense that should have an effect on the rate of interest charged. Therefore one comes to the conclusion that these Regulations, which were made before the fall in the rate which accompanied the change in the Bank Rate ought to be revoked and replaced by Regulations specifying a distinctly low rate of interest. That is quite apart from the general point that these rates tend to be too high.
I am concerned with these Regulations. I do not complain about the open- 1324 cast coal rate, we are not concerned with that today. I am complaining about these Regulations. The hon. and learned Gentleman is present to deal with what is a comparatively small matter but one concerned with justice and fairness both to the people being compensated and to the local authorities carrying out public work. I hope he will not feel bound to uphold this rate but will tell us that his right hon. Friend will reconsider the matter and will make a substantial reduction in it.
When dealing with short-term loans of this character in future, I hope it will be borne in mind that as a rule they ought to be at a very low rate of interest. It should be remembered that to have a rate of interest which seems too high to the acquiring authority will have the effect of tempting the authority to wait until it can get in at a more reasonable rate. I agree that the inducement is not high, that the amount of money is probably not large, but there is no reason to neglect the point on that score.
Let us hope that tonight we shall not have the all too frequent ending to a Prayer upon which there is to be no Division when the Minister concerned says, "Yes, but…yes, but …yes, but …" and does not really consider the public advantage and, as in this case, fairness between the acquiring authority and the owner and between one owner and another. So, hoping for the best, I urge the hon. and learned Gentleman to think carefully and to weigh this matter carefully.
§ 10.34 p.m.
§ The Financial Secretary to the Treasury (Mr. J. E. S. Simon)
It is agreeable to find that the hon. and learned Member for Kettering (Mr. Mitchison) expects a spokesman from this Dispatch Box to say, "Yes, but…" rather than, "No, but…" in reply to a Motion of this kind. Before dealing with what, I agree, is an important matter affecting compensation to private individuals dispossessed of land and which may result in a burden being put on the ratepayers, may I extend congratulations to the hon. Member for Acton (Mr. Sparks) on his first speech from the Opposition Front Bench. We know that the hon. Gentleman is a master of these matters of local government. The way in which he gave 1325 the background to this subject was particularly agreeable to me, because it saves me from having to go into the details which it is necessary to know in order to discuss the point at issue. It was a very great pleasure to see him speaking there, and I hope he will speak from that Bench and that Box for many years to come.
I have not enjoyed the felicities of the Scottish Standing Committee, so I have not had to answer the hon. Member for Glasgow, Central (Mr. McInnes) before, but, if I may say so with respect, he made what seemed to be a very important point, namely, whether the interest should be in any way geared to the longterm interest rates or short-term interest rates. That point the hon. and learned Member took up later, and I propose to deal with it.
This is an important matter, because it concerns, on the one hand, the rights of the private individual dispossessed of his land in the public interest and, on the other hand, the expenditure of public moneys through the local authorities. We would be probably agreed on two general principles. So far as I can see, both in principle and in practice there has been no difference here between what happened under the former Government and the present Government. Although, as the hon. Member for Acton mentioned, the rates of interest were lower, the way the matter was dealt with was the same.
Looking at the point of principle, I think we would all be agreed that in a perfect world no individual would be dispossessed of his land in advance of compensation. It would obviously be desirable if possible that he should be paid full compensation at the moment the local authority or the public authority —for of course this order concerns more than local authorities—enters upon his land. But this is a less than perfect world, and in many cases it is necessary for the public authority to enter on land in advance of agreement on compensation.
That agreement may be considerably delayed. I think the hon. Member for Glasgow, Central was right when he said it may extend to a matter of years, although I think he was right in saying that one would be disturbed if one found it was more than three years. One 1326 knows there are cases where there are difficulties in negotiations and sometimes, as the hon. and learned Member knows from his professional practice, there are difficulties in making title and that sort of thing which cause delay. Therefore, the interest to be paid during the period of delay may be an important matter.
The first general consideration is that we would all want to put the dispossessed subject in the same financial position as he would have been if at the point of entry he had managed to secure an agreed sum in compensation. The second general point of principle on which I think we all would be agreed is that there should be an incentive to a rapid completion of the transaction, as rapid an agreement as possible, or, if the matter cannot be agreed, as rapid a determination as possible. Negotiations should not be prolonged beyond what is justifiable in order to secure fair compensation.
It is against those two general principles that the interest rates have been fixed by the Treasury under successive Governments. To take the point of view of the private individual who is dispossessed, one must envisage him as seeking accommodation from the bank in order to put himself in the meantime in the sort of position he would have been if compensation had been paid at the point of entry.
For the individual, therefore, one looks to the current overdraft rate. If he is paid at a higher rate, obviously he has an incentive to prolong negotiations, which is undesirable. If he is paid at a considerably lower rate, he will be out of pocket, which is unfair to him. That is from the point of view of the private individual.
The local authority, on the other hand, is saving interest on a long-term loan which it would otherwise have had to raise in order to pay compensation in a case of normal compulsory compensation. I will deal later with the point raised by the hon. Member for Glasgow, Central—whether this should be geared to the short-term rates—but, assuming that the compensation had been paid at the point of entry, it would be a long-term loan which the public authority would normally be raising in acquiring property permanently.
§ Mr. Mitchison
What I think the hon. and learned Member is forgetting is the very high proportion of loans which is now being raised by local authorities, particularly perhaps the smaller authorities, on mortgages for quite short periods. For example, small local authorities such as the district councils in Northampton-shire raise a lot of money at 5 per cent.
§ Mr. Simon
It is undoubtedly true that a great many current transactions are financed on the mortgage market. Nevertheless, in looking at what it is necessary to raise in order to complete a long-term transaction—I see that the hon. Member for Glasgow, Central agrees—it is right that one should look at the long-term rates. For example, in acquiring land for a school, although the local authority might need immediate accommodation in the mortgage market, it would be in the long-term market that it would raise the funds necessary for such a transaction.
In the case of a public authority one looks to the long-term interest rate, and one can view that in the same way as one views the position of the individual; if the rate fixed by the Treasury is very much above the long-term interest rate, the local authority is having to pay too much, while if it is fixed very much below that rate, there is an incentive for the public authority to prolong the negotiations, It is exactly reciprocal to the case of the individual.
What the Treasury seeks to do, and has sought to do over all the years that this power has rested with it, is to fix a rate in relation to both those considerations —the rate at which the individual has to borrow from the bank on the one hand and, on the other hand, the rate at which the public authority has to borrow for the appropriate term in the market or from the Public Works Loan Board or—for a great many public authorities, like the new towns and the Hydro-Electric Board in Scotland—from the Exchequer.
If the bank borrowing rate is above the long-term interest rate in the market, as it might well be, then if a rate under this Act is fixed half-way between the two there is an equal incentive in respect of both parties to complete, or an equal disincentive to prolong negotiations. If, on the other hand, as sometimes happens, the two rates are reversed, and this rate is fixed halfway between them, both 1328 parties are again equally treated. It was for that reason that the rate was fixed in the present case at 5½ per cent. The prevailing overdraft charges at that time were 5½ per cent.—that is, Bank Rate plus 1 per cent. in the usual way.
§ Mr. Simon
Yes, at that time. There was a 4½ per cent. Bank Rate at the time when the Regulations were made.
On the other hand, looking at the other consideration that has to be borne in mind, the average long-term borrowing cost to the various public authorities stood at a fraction above that rate, so that in fixing the rate at 5½ per cent. one was, if anything, penalising the dispossessed landowner and favouring the local authority. However, as I say, it was marginal, and done really because 5½ per cent. was the nearest convenient figure; indeed, if anything, it erred in favour of the public authority.
The hon. Member for Glasgow, Central asked—very pertinently, if I may say so —why the rate was geared to the long-term and not to the short-term rate, since in theory a public authority could raise money in the short-term market to finance what is essentially a short-term transaction. If the House has followed my analysis, it will see that the reason for gearing the rate to the long-term market is that one wants to give incentive to rapid completion. If it were geared to the short-term rate—considerably below, as it sometimes is, the long-term rate—the public authority quite clearly would have a strong incentive not to complete. So, since what is relevant is to ask what would the public authority have to pay if it paid the compensation at the moment of entry, it is the long-term rate that is relevant.
The hon. Member for Acton asked, and his question was echoed by his hon. and learned Friend, why the rate is only 4½ per cent. in relation to opencast coal operations—
§ Mr. Mitchison
Before the hon. and learned Gentleman turns to that, will he deal with what seems to me to be the more serious question of the disincentive to the public authority entering early? If the rate is or seems to it to be too high, it will wait until the compensation is 1329 assessed before entering. Not all compulsory acquisition entails an early entry. It has to be weighed by the authority.
Secondly, the Financial Secretary gave us the figures before Bank Rate was changed. He will appreciate that a different figure results from the same premises now that Bank Rate has been lowered.
§ Mr. Simon
I do not think it is right that there is a disincentive to early entry. If the local authority entered at the same time as it had to pay the compensation, it would have to raise the money at the long-term rate, so there is no such disincentive. As I said at the beginning, the ideal position, as we would all admit, would be that the local authority should be able to know what compensation is payable at the moment of entry; and the compensation payable would be the full value of the land—for which it would have to raise a loan in the long-term market. There is, therefore, no disincentive in the authority having to pay long-term rates of interest from the beginning.
I had intended to deal with the hon. and learned Gentleman's second point at a later stage, but it is quite convenient to deal with it now. It is, of course, right that this rate was fixed when the Bank Rate was 4½ per cent., but the Bank Rate has since been reduced to 4 per cent. and the hon. Member for Glasgow, Central, in drawing attention to this, asked what was the relationship. There is a close relationship between the Bank Rate and the short-term market rate. There is also a direct relationship between the Bank Rate and the overdraft rate.
§ Mr. Simon
But that is only one side. The other side is the long-term market rate, but that is not directly affected by a reduction in the Bank Rate, although it does tend—indirectly, and after a time —to reflect movements in Bank Rate.
Therefore, all I can say is that a movement in the Bank Rate is certainly a relevant consideration but does not necessarily determine a move in this interest rate any more than it does in the Public Works Loan Board rate. That further movement down in the Bank Rate 1330 is something which we are hound to take into consideration. We are keeping these interest rates under review, but at the moment it does not appear that public authorities' borrowing rates, medium and long-term, have yet been correspondingly affected.
§ Mr. Mitchison
I apologise for interrupting the hon. and learned Gentleman, but he himself told us how this rate was fixed. It was fixed at half-way between the overdraft rate and the Public Works Loan Board rate. The overdraft rate has now fallen by a half per cent., and unless the hon. and learned Gentleman's reasoning varies with Bank Rate, we appear to be entitled to at least a quarter per cent. reduction, and I wonder what interest he is going to allow to local authorities for the period between the time when this is put to him and when it is acted upon.
§ Mr. Simon
The hon. and learned Gentleman has apparently not done me the courtesy of following what I said. At the time this interest rate was fixed, I pointed out that the overdraft rate was 5½ per cent. The public authorities' medium and long-term borrowing rate was slightly above that, and therefore the rate of 5½ per cent. was fixed favourably to the public authorities. Since then it may be that the overdraft rate has dropped by a half per cent., but there has been, so far as we have been able to measure, no corresponding movement yet in the medium and long-term rates of the public authorities. Therefore, although we keep this matter under review and are prepared to move, there is not yet a case for shifting the interest rates.
I was going to deal with the important point made by the hon. Member for Acton, the hon. Member for Glasgow, Central and the hon. and learned Member for Kettering, namely, the question why in the case of entry on land used for opencast coal workings the rate was fixed at 4½ per cent. I think the difference arises precisely from the analysis I ventured to make, because there one is not acquiring land permanently and it is not therefore reelvant to look at the medium and long-term rates. It is there that the short-term rate is relevant. Therefore, one gives greater weight to the short-term rate in fixing the rate of 1331 interest payable where there is delay in entry on to land being used temporarily for opencast coal working.
Finally, I am bound to point out that in doing what we are doing we are acting quite consistently with the practice adopted by hon. Members opposite when they were in power. The rate of interest under the Town and Country Planning Act stood at 4 per cent. from 1944 until 1st May, 1947, and then, as the hon. Gentleman pointed out, it went down to 3½ per cent. But during that time the Bank Rate stood at no more than 2 per cent., and that meant that at a time when the private land owner could get a loan at about 3½ per cent. from his own bank at overdraft rate the local authorities were obliged to pay him 4 per cent, if they could not reach agreement.
During that time the local authorities—I am taking purely the local authorities in this case—had to borrow from the public Works Loans Board at rates varying between 3½ per cent, and 2½ per cent. As I say, they had to pay 4 per cent. at the beginning of that time and subsequently 3½ per cent. to the land owners. As so often, I find that the practice of the hon. and learned Gentleman and his friends is so much better than the principles that they preach—
§ Mr. Mitchison
At least we put it right, and that is what we are asking the hon. and learned Gentleman to do.
§ Mr. Simon
The hon. and learned Gentleman is quite incorrect. Even when it came down to 3½ per cent. it was still substantially above both the overdraft rate and the Public Works Loans Board rate. We on the contrary tried to put it between those two so as to provide an incentive to quick completion and so as to act fairly between the conflicting interests of the dispossessed land owner on the one hand and the ratepayers on the other.
I was very glad to hear that the hon. and learned Gentleman was not going to call a Division, because it would only have the effect that the interest rate would be kept still higher. All I can say is that this is a flexible instrument. We shall continue, as the party opposite did, to use it consistently with the principles that I have laid before the House, which seem to me to be fair to all concerned.
§ Mr. Sparks
In view of the remarks of the hon. and learned Gentleman the Financial Secretary, although we do not agree with all he said, I beg to ask leave to withdraw the Motion.
§ Motion, by leave, withdrawn.