§ 39. Mr. Beswickasked the Chancellor of the Exchequer if he will give the last four dates on which the interest rate on loans from the Public Works Loan Board was adjusted, and the respective rates at which loans were then fixed.
The Chancellor of the Exchequer (Mr. Derick Heathcoat Amory)The dates were 16th February, 1957, 13th July, 1957, 28th September, 1957, and 25th February, 1958. I am circulating a statement of the respective rates in the OFFICIAL REPORT.
§ Following is the statement:
1069§ 40. Mr. Beswickasked the Chancellor of the Exchequer what adjustment he proposes to make of the interest rate on loans made by the Public Works Loan Board.
§ 41. Mr. Cooperasked the Chancellor of the Exchequer if, in view of the further reduction in the Bank Rate, he is able to announce a lower rate of interest for loans to local authorities from the Public Works Loan Board.
§ 52. Mr. Hunterasked the Chancellor of the Exchequer, in view of the reduction in the Bank Rate to five per cent., if he will take the necessary measures to reduce the rates of interest for loans to local authorities from the Public Works Loan Board.
Mr. AmoryThe rates of interest on loans from the Public Works Loan Board are not linked to Bank Rate but are fixed to reflect the rates prevailing in the market for loans to local authorities which are kept constantly under review.
§ Mr. BeswickIs the Chancellor aware that many local authorities feel very bitter about the extravagant cost of raising money today? Since the volume of their essential work is closely controlled by Government Departments, is not there now an urgent case for revising downwards the rates for loans from the Public Works Loan Board?
Mr. AmoryAs the hon. Gentleman knows, it is Government policy to encourage local authorities to borrow in the market where that is practicable. I think that is a healthy system, as against borrowing from the Public Works Loan Board, and that being so, in equity to those who do borrow in the market, I think it is right that the rates of interest charged by the Board should be on an equivalent basis to those available to authorities borrowing on the market.
§ Mr. CooperIs my right hon. Friend aware that the present rates of interest charged by the Public Works Loan Board are in many instances substantially higher than the rates available on the market? Has not it always been the practice that the interest rates on loans from the Board should bear some relationship to the Bank Rate? Will my right hon. Friend please look into this matter again?
Mr. AmoryI think the rates available to local authorities on the market bear some relation to the Bank Rate, though not necessarily a day-to-day connection. I do not think my hon. Friend is right in saying that the rates charged by the Public Works Loan Board are higher than the rates available, on the whole, to local authorities in the market. If he has any evidence of that, I should be interested to have it.
§ Mr. MitchisonIs the Chancellor aware that the real competition with the Public Works Loan Board's loans, which are mostly for smaller authorities, is with mortgage loans; that there is a wide diversity at present between the rates paid for mortgage loans, and that the indications are that if the Board's rate is to conform with the mortgage loans rate, and if the rates generally are to be kept as reasonably low as possible, the Board's rate ought to be lowered?
Mr. AmoryThis matter is kept under continuous review, but I agree with what the hon. and learned Gentleman says about the object in general. I will look into the point he has raised about mortgage rates.
§ Mr. HunterIs the Chancellor aware that the local authorities are very disappointed that, though the Bank Rate has been reduced to 5 per cent., interest on the Public Works Loan Board's loans has not been reduced as well?
Mr. AmoryAs I have said, this matter is kept under continuous review, and changes will be made whenever they are justified.
§ Mr. H. MorrisonCan the Chancellor say whether the Public Works Loan Board's rate of interest was increased when the Bank Rate was increased? If it has not fallen since the Bank Rate has fallen, why does he pursue a contradictory policy between two operations?
Mr. AmoryI can assure the right hon. Gentleman that there is no contradictory policy. As he knows, of course, it is very common for changes in the Bank Rate to be anticipated and discounted by the market.
§ Mr. CooperIn view of the nature of my right hon. Friend's reply, I beg to give notice that I shall raise this matter at the earliest opportunity on the Motion for the Adjournment.
§ 44. Mr. Hunterasked the Chancellor of the Exchequer the total amounts of loans by local authorities from the Public Works Loan Board for 1957, and for 1958 to the latest convenient date.
Mr. AmoryThe total amount advanced in the calendar year 1957 was £130,790,690, and that from 1st January to 30th May, 1958, was £23,614,690.
§ Mr. HunterDo not these figures show that the high rates of interest charged by the Public Works Loan Board have forced local authorities to borrow at high rates from other sources?
Mr. AmoryThe hon. Member will realise that the Question refers only to borrowing through the Public Works Loan Board. Since the higher interest rates came into force last autumn there has been a general falling off in applications, and, on the other hand, there has been a greater availability of money in the open market. That is the reason for these figures.