HC Deb 17 March 1964 vol 691 cc1174-5
23. Mr. Frank Allaun

asked the Chancellor of the Exchequer if he will take steps to ensure that Public Works Loan Board interest charges are not increased beyond -their present rate of 5¾ per cent. in view of the effect which increased charges would have on house building programmes.

Mr. Maurice Macmillan

No, Sir; the rate was in fact increased to 6⅛ per cent. on 14th March.

Mr. Allaun

Is the hon. Gentleman aware that; his raising of the rate, after I put the Question down, means that if interest is paid for 60 years on a £2,600 council flat it will cost no less than £9,833, or £538 more than it did a week ago, an increase of 3s. 5d. a week in rent? Secondly, would the hon. Gentleman state what the new rate will be, starting next month, for the 20 per cent. quota of P W.L.B. loans? The local authorities are most anxious that there should be a substantial decrease and they do not yet know what the figure will be.

Mr. Macmillan

On the first part of the supplementary question, I think that the effect o changes of this kind when taken in one isolated instance like that can be exaggerated. Most of the big local authorities consolidate their borrowing and the immediate effect is not as great as all that. Secondly, as the hon. Gentle man himself suggested, under the new arrangements local authorities may borrow up to one-fifth of whatever they borrow long-term from the Public Works Loan Board, at the Exchequer rate. Exchequer rates are now varying between 5⅜ per cent. and 6 per cent., depending upon the period of borrowing. One of the reasons for maintaining the P.W.L.B. rate at round about the market rate for local authorities is to maintain this differential.

Mr. Allaun

But does the hon. Gentleman not know that all these rates of interest have been affected by the Bank Rate, not only for councils but for owner-occupiers and for housing societies? Is it not true that the Alliance Building Society has decided not to reduce the borrowing rate as a result of the Bank Rate going up?

Mr. Macmillan

The Alliance Building Society has not, as far as I am aware, increased its rate. Movement in the Public Works Loan Board rate is adjusted to the local authority market rate which, as the hon. Member suggested, is affected by interest rates generally. The local authorities, under the new arrangements, are enabled to borrow a proportion of their long-term requirements at the lower rate.