HC Deb 09 February 1961 vol 634 cc604-7
18. Mr. W. Hamilton

asked the Chancellor of the Exchequer what representations he has received from local authorities protesting about rates of interest chargeable by the Public Works Loan Board following the recent reduction of the Bank Rate; and whether he will take steps to bring those rates more into line with the Bank Rate.

19. Dr. A. Thompson

asked the Chancellor of the Exchequer to what extent, when fixing the rate of interest charged by the Public Works Loan Board, he takes into account current Bank Rate.

38. Mr. Frank Allaun

asked the Chancellor of the Exchequer if, following the 1 per cent. reduction in the Bank Rate, he will similarly reduce interest charges on housing loans from the Public Works Loan Board and on other loans for council house building.

55. Mr. Ross

asked the Chancellor of the Exchequer whether he will assist the local authorities in the new and additional capital tasks placed on them by the Government by reducing the Public Works Loan Board's rate of interest.

Mr. Barber

Several local authorities have recently made representations about the level of the Public Works Loan Board's lending rates. These rates reflect the cost of local authority borrowing on the market and changes are made whenever alterations in the market rate justify this. The recent trend of market rates has provided no justification for reducing the P.W.L.B. rates. The level of Bank Rate has no direct link with the level of the P.W.L.B. rates.

Mr. Hamilton

Is the hon. Gentleman aware that local authorities are complaining bitterly about the adverse effects of these penal interest rates on the activities which the Government have repeatedly imposed on them? The Government have even extended local authority functions, particularly in regard to mental health services. If the Government are serious about this, why do they not give local authorities some encouragement?

Mr. Barber

As I am sure the hon. Gentleman knows, the Government have made it clear on a number of occasions that we do not think that it is right to insulate local authorities from a general trend of this sort in interest rates by giving them what would in effect be a concealed subsidy.

Dr. A. Thompson

Is not the hon. Gentleman concerned about the position revealed in the last Annual Report of the Public Works Loan Board, in which it was revealed that the number of loans has fallen catastrophically since 1951? The Report reveals that local authorities are being compelled to postpone, abandon and suspend essential projects in the fields of education, housing and public health.

Mr. Barber

If local authorities cannot borrow on reasonable terms in the market, they are entitled to go to the Public Works Loan Board.

Mr. Ross

Is not the Minister aware that the Government themselves have placed upon local authorities new and additional duties in respect of education and local health which will demand considerable capital expenditure? Is not he aware that local authorities throughout the country are in considerable straits because of this? If he wishes the hopes of the House, and even the proclaimed hopes of the Government, to come to anything, he must face the fact that the present high interest rates are militating against the fruition of these plans.

Mr. Barber

I can only repeat that the present rates of interest are a reflection of the general pressure of demand for capital. We have, time and time again, made our position quite clear, namely, that we believe that as far as possible local authorities should borrow from the market in their own name and on their own credit.

Mr. Jay

Has the Economic Secretary noticed that President Kennedy intends to combine lower long-term interest with high short-term interest rates?

Viscount Hinchingbrooke

Why do we have to have him brought into it every time?

Mr. Jay

Can the Economic Secretary explain, even if the noble Lord cannot, why if this can be done in the United States it cannot be done here?

Mr. Barber

No, I cannot.

Mr. Allaun

Is the hon. Gentleman aware that council flats costing £2,400 to build eventually cost £9,063 before the interest at the current rate of 6 per cent. has been paid for sixty years? This means that, if there were a reduction only to 5 per cent. it would save £1,470, or 9s. 5d. a week in rent, and 5 per cent. is still 2 per cent. higher than the rate was under the Labour Government.

Mr. Barber

The hon. Gentleman asked in his Question if my right hon. Friend will reduce interest charges. I have already given him the answer to that. I cannot without notice go into detailed calculations.

Mr. Manuel

Has the hon. Gentleman made any reply to Ayr County Council, which has made representations to him on this subject? Is he aware that the Finance Committee, after an exhaustive review of its public work commitments, finds itself totally unable to undertake them because of the high interest rate charged by the Public Works Loan Board? Will not he try to equalise it to the Bank Rate of 5 per cent. and give local authorities some hope of completing the promises made to the electors during the last election?

Mr. Barber

The hon. Gentleman has a Question later on about the Ayr County Council. However, I will tell him now that the rate for long-term borrowing has not fallen since the Bank Rate was last reduced.

Mr. Hamilton

On a point of order. In view of the extremely unsatisfactory nature of those replies, I beg to give notice that I shall raise the matter on the Adjournment.