HC Deb 14 February 1966 vol 724 cc955-9
Mr. Longbottom

I beg to move Amendment No. 10, in page 3, line 17, to leave out: "taking one year with another."

The purpose of the Amendment is to probe with the Minister a point of principle concerning interest rates. I listened carefully to what the right hon. Gentleman said on Clause 4 and I accept entirely the way in which he sees the Corporation developing, that it should be independent and that it should not be subject to Ministerial interference, except in laying down general points of principle. We entirely endorse the need for the Corporation to be self-financing. It is, therefore, right that if it is asked to be self-financing, it should be responsible for making up its mind how it looks after its fund, when it raises money, and so on.

What I am interested to know is the meaning of the words taking one year with another. Does the Minister intend that the Corporation should consider the position over a number of years, yearly or biennially? The Minister has made the point that the attraction of the Corporation—and we accept this—is that it will be able to offer advantageous terms of finance that are not at present readily available on the market. I entirely accept the truth of this concerning the term of years, because finance is not normally available over as long a term as it is envisaged that the Corporation will provide it. As the Minister said on Second Reading, it might go so far as to cover the whole of a doctor's working life. That is admirable.

The Minister must, however, accept that one of the other facts of finance is the rate of interest which is to be paid. If it is to be paid over a person's lifetime as opposed to merely 10 or 15 years, the rate of interest will be very much more a matter of concern.

The Minister will accept that the Corporation is likely to be beginning its career in a period of high interest rates. Not for a long time have interest rates been as high as they have been over the past year. It will be attractive for people to take advantage of the Corporation when it starts its work only if they can feel that they are not taking a set rate of interest over the whole of their working lives but that, like most other forms of borrowing, it will be a flexible rate determinable by the amount of money which the Corporation is able to borrow from time to time at differing rates.

I am delighted to see that under subsection (2) the Corporation will have reserve powers so that it can borrow money at a low rate of interest to put into its reserves if we ever get back to the period of a decent low rate of interest. I appreciate to the full what the Minister said about the Corporation being independent, but I think that it would be wise for him to say something about this question of the rate of interest, and to give some guidance.

A moment ago the right hon. Gentleman talked about building societies. There are some independent building societies, but most of them—not all—respond to the wishes of the Building Societies Association. This Corporation, unlike building societies, is not a profit-making venture, and, therefore, it should be able to keep its rates of interest lower, but if the Minister envisages that the rate of interest will be flexible according to market circumstances we will be satisfied.

Mr. K. Robinson

The Clause as it stands enables the Corporation to set a deficit in one year against a surplus in another, provided that it breaks even over a period. If the Amendment were (accepted, the Clause would be very much more restrictive, and it would require the Corporation to avoid a deficit in any one year.

As I explained on Second Reading, it is the intention that the Corporation should operate on a sound commercial basis, and except to the extent that member's fees and expenses may be met by the Exchequer, it will not be directly subsidised. It will have to raise its funds by borrowing, and it will have to pay the full appropriate market rate of interest. Thus, in fixing its lending rates, the Corporation will have to take into account not only the interest which it has to pay on the borrowed capital, but also its administrative overheads and the need to cover any capital losses which it may incur, although we hope that these will be very small. Both its income and expenses are bound to vary from year to year, and it seems reasonable therefore that the Corporation should be allowed to achieve a balance over a period of years.

The hon. Member for York (Mr. Longbottom) will, I am sure, appreciate that that is especially important in the early years, not only because of current interest rates, but because to begin with the Corporation's administrative overheads will inevitably be higher in relation to the total volume of business that it does than they will be later on when the business has considerably grown. Therefore, if the Corporation were required to avoid a deficit in each of the first few years it would, I think, be obliged to charge a rate of interest which would be wholly prohibitive. This would nullify the purpose of the Bill, and, I think, prejudice the improvements in general practice which we all want to see.

I think that, on reflection, the hon. Gentleman will agree that it is undesirable to require the Corporation to break even over a particular year. The phrase taking one year with another may not be an ideal one, but it is hallowed in Statute after Statute, and this is one of those situations where nobody has thought of a better phrase. It is to give the Corporation that degree of flexibility which the hon. Gentleman wants it to have that this has been put into the Bill. In default of it, the obligation for the Corporation to function on a commercial basis would I think make it an instrument of very dubious value to the profession. I hope that in the light of that explanation the hon. Gentleman will not press the Amendment.

I do not intend to fall for the hon. Gentleman's blandishments and try to guess at what might be the rate of interest, because this must be a matter for the Corporation itself. Its rate of interest will to some extent depend on its borrowing pattern, and its borrowing pattern is essentially a matter which the Board of the Corporation itself must determine. In the light of that explanation, I hope the hon. Gentleman will withdraw the Amendment.

Mr. Longbottom

I am grateful to the Minister for the clarity of his statement. I had not realised that the words taking one year with another were so hallowed on the Statute Book. I am surprised that Parliament has not found a better way of expressing itself.

As I said when I introduced the Amendment, it is a probing one, and I accept that we do not want to restrict the Corporation by making it balance its books every year. I also accept what the Minister said about the need for flexibility, particularly when one is operating in a period of high interest rates, because one hopes that it will be possible to take advantage of low interest rates when they come along and thus average them out.

I was not trying to trap the Minister into setting an interest rate. So many of his colleagues on the benches opposite have talked so many times, and set so many patterns of interest rates in the past, that I am sure neither the Minister nor any of his colleagues will start talking about exact rates of interest in the future, but I think that it is useful to discover that there is likely to be flexibility, because if we are to make the Corporation attractive it must be able to build up its funds as quickly as possible so that the administrative expenses are more widely shared, and it must be able to assure those who borrow money that their rates of interest will depend only and entirely on the rate at which the Corporation itself is able to borrow the money.

Having been satisfied by what the Minister said, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 5 ordered to stand part of the Bill.

Clauses 6 to 9 ordered to stand part of the Bill.