HC Deb 26 June 1962 vol 661 cc925-6
1. Mr. Fitch

asked the Chancellor of the Exchequer if, in view of the difficulties caused to local authorities, he will reconsider the rates of interest which should apply to all loans advanced by them, as set out in Circular 30/62 from the Ministry of Housing and Local Government.

The Chancellor of the Exchequer (Mr. Selwyn Lloyd)

The rates of interest charged on loans from the Local Loans Fund are kept in line with those ruling on the market for local authority borrowing. If the market rates fall, the rates which the Public Works Loan Board charges on these loans will be reduced also.

Mr. Fitch

Would not the right hon. and learned Gentleman agree that in the past when Bank Rate has fallen rates of interest on long-term loans to public authorities have also fallen? Why has not this happened in this case? Why does the Public Works Loan Board still charge 6¾ per cent. when the Bank Rate has gone down? Will not he use his influence to bring this high rate of interest down, thus helping would-be house purchasers to buy houses?

Mr. Lloyd

The rates of interest of the Public Works Loan Board have decreased. The rate was 7½ per cent. for certain types of loan last August. But these rates are not associated directly with the short-term rate, which is the Bank Rate. I see no reason why the trend for long-term interest rates to fall should not continue. I remind the hon. Member that another factor affecting the costs of housing is that costs have gone up about 17½ per cent. during the last two years and that during that time earnings have risen by 17 per cent.

Mr. Callaghan

While we appreciate that the right hon. and learned Gentleman wants an alibi, will he answer my hon. Friend's question? Before the Chancellor's emergency Budget last July the long-term rates for the local authorities were 6¼ per cent. They are now at 6¾ per cent. As Bank Rate is now down to 4½ per cent., why have these rates not declined also to the level of a year ago, in view of the very heavy burden placed on the local authorities and the work they are trying to do?

Mr. Lloyd

These rates do not follow Bank Rate, which is the short-term rate. They follow the long-term rates, which are at present showing signs of falling. I see no reason why that trend should not continue.