(RATES OF INTEREST.) (Hansard, 19 February 1968)

§ Mr. Diamond
I beg to move Amendment No. 6, in page 5, line 18, after 'redetermined', insert 'for further loans'.
With this Amendment we may also consider Amendment No. 7: In line 20, leave out '(for further loans)'.
These are drafting Amendments. There was a suggestion at one time that the prose was not perfect. My hon. Friend the Financial Secretary is always extremely disturbed when any suggestion of that kind is made. He therefore went to great trouble to see that the prose was perfected. I hope that the House will feel that we have moved somewhat towards that goal in these Amendments.

§ Mr. Diamond
I beg to move Amendment No. 8, in page 5, line 26, at end, insert:
168 (6) The Treasury shall cause—

(a) the rates of interest determined from time to time by them as the lowest rates under this section, and

(b) all other rates of interest determined from time to time by them in respect of local loans,
to be published in the London and Edinburgh Gazettes as soon as may be after the fixing of those rates.
In Committee the Opposition moved an Amendment to require publication of the rates of interest on all loans made from the National Loans Fund. This Amendment provides for the publication of the minimum rate of interest on loans from the National Loans Fund, that is to say the rates required to satisfy the conditions of Clause 5. These generally are the rates for lending to nationalised industries and for Public Works Loans Board quota loan to local authorities, and the bulk of the other lending from the Fund. The requirement for the publication of other P.W.L.B. interest rates, for example on the last resort loans, will remain.
I hope that the House will feel that this is a satisfactory Amendment. It provides information which I think is needed. The Command Paper to which I have made reference gives the fullest possible details of the terms relating to the various loans retrospectively and in this sense I think we are giving Parliament the information it needs.

§ Mr. Michael Alison (Barkston, Ash)
I wish to speak a word of appreciation to the Chief Secretary for helping us over the proposal we made in Committee, but I wonder if I may probe him a little further on the general question of the lowest rate now that we are using that phrase in the Bill. There are so many different rates of interest in the market at any one time that there is a spectrum of rates of interest.
I am particularly concerned to establish more clearly how the Chief Secretary will understand the phrase, "the lowest rate" in the light of the I.M.F. Letter of Intent. He will recall the interesting provisions in paragraph 11 in which the Government commit themselves to the following doctrine: It continues to be the Government's policy to meet its own needs for finance as far as possible by the sale of debt to the non-bank public and interest rate policy will be used to this end. 169 It is a matter of some interest to determine what is the lowest rate at any given time particularly the lowest rate in terms of the sale of debt to the non-bank public because this is a specific proviso of the Letter of Intent.
If we have a situation such as prevails today when the Bank Rate the Government have imposed for the time being is at 8 per cent. and therefore borrowing rates in the market are up all round, there seems to be in the mechanics of Government financing a certain possibility to be devious in the way in which they raise money even on the face of things raising it from the non-bank public.
Let me suggest to the Chief Secretary the sort of problem we have in mind. Suppose it happens to be the Government's need, within a period when the Bank Rate is at 8 per cent., to raise more money to meet part of their budgetary needs or to meet part of the net borrowing requirement. Will the Government in those circumstances issue to the non-bank public a medium- or long-term stock with a coupon related to the current Bank Rate at 8 per cent.? Will not they do something quite different—that is, issue a stock in which the non-bank public will not be interested at the sort of coupon it might have, but a stock which will neveretheles3 be taken up by the Departments and sold through the tap at perhaps a very mi.ch later date?

§ Mr. Speaker
Order. With respect, are not we getting a little wide of the Amendment, which is about publication of rates of interest?

§ Mr. Alison
I think that you will perceive, Sir, when I apply the point of this; inquiry that the rate of interest comes very directly into this, because if the Treasury issues a stock which is taken up by the Departments and which is not taken up by the non-bank public, bearing a coupon which is not in any way related to the present Bank Rate, it will in fact meet its necessary borrowing requirement by the use of the floating debt. Will the rate of interest which it has to pay to the money market in fact be a rate of interest which will figure at all—

§ Mr. Speaker
Order. I hope that the hon. Gentleman will understand what I am saying. The Amendment is not concerned with what the hon. Gentleman seeks to discuss. The Amendment relates to whether rates of interest should be published in the two Gazettes.

§ Mr. Alison
I accept your guidance and your Ruling, Mr. Speaker. I still cannot quite see how the Chief Secretary can specify in the Amendment that the lowest rate of interest will be a figure which will be published, unless he can tell us which rate of interest it is of the various rates which the Government may have to pay which will be published. I hope that the illustration that I have given of the different needs the Government have for financing with different rates of interest applicable will enable the Chief Secretary to give me some reassurance.

§ Mr. Diamond
With the permission of the House, Mr. Speaker—

§ Mr. Speaker
Order. The right hon. Gentleman does not need the permission of the House.

§ Mr. Diamond
I am overwhelmed, Mr. Speaker. The Amendment to which you so clearly drew our attention, Sir, does, in my view too, with respect, deal with publication of rates of interest. The hon. Member for Barkston Ash (Mr. Alison) has asked what I meant by "the lowest rates" of interest or, as I said earlier, the minimum rates of interest. I tried to anticipate that by saying that it means the rate of interest as laid down in the Clause. The Clause prescribes that The Treasury shall, on each occasion when they determine or approve any such rate of interest for a loan or class of loans, satisfy themselves that the rate would be at east sufficient to prevent a loss if— (a) the loan… was met out of money borrowed by the Treasury at the rate at which the Treasury are for the time being able to borrow money for a comparable period, and on other comparable terms. The situation is that, where a loan is being made out of the National Loans Fund, regard must be paid to the period and the other terms, and the loan must be lent at not less than the rate of interest at which the Treasury are for the time being able to borrow money. 171 That is the minimum rate. That is the rate in which the public is interested. That is the rate which it is proposed to publish in the two Gazettes. I think that that answers the hon. Gentleman's question, if he will consider the matter with his usual care.