LOCAL AUTHORITY FINANCES (INTEREST RATES)

HC Deb 28 April 1969 vol 782 cc983-1028

5.1 p.m.

Mr. Peter Walker (Worcester)

I beg to move, That this House regrets the serious effect of high interest rates on local authority finances. In view of the late start to this debate, I shall endeavour to make my remarks short. I am sure that the winding up speeches will be equally brief, thus enabling hon. Members on both sides of the House to make their contributions to this very important debate. The size of this problem is indeed vast. Something like £13,000 million is currently being borrowed by local authorities. This means that for every family of four something like £1,000 local government borrowings are taking place and every time there is an increase in the rate of local government borrowing of 1 per cent., a burden of something like 4s. a week is added to the expenses of every family of four.

The importance of this topic was reflected before the General Election in which Labour came to power, by the very high priority given to it by the Prime Minister himself. I shall quote from a letter written to the Prime Minister by Mr. Eric Sewell, Parliamentary Correspondent of the Daily Mail, following a luncheon that took place in the Press Gallery of the House of Commons not long after the Prime Minister took on the leadership of the Labour Party. I think this letter is of some importance because it shows the great priority which the party opposite placed on this topic when hon. Members opposite were in Opposition.

The letter starts: Dear Mr. Wilson, I think you have now made it clear just what kind of image of leadership you want to project to the nation. It went on: In place of the glassy glare at the cameras, there was the offbeat crack, the mild tongue in cheek, the occasional burst of indignant sincerity. Rates was a good peg on which to hang your party's aims. You know that everyone in the country is conscious just now of the council's hand hovering menacingly over his pocket. The letter went on to say: Cashing in on the current rates controversy, you outlined the plans obviously aimed at countering the Tories' efforts to turn you into a nationalisation bogy-man. The interesting thing about this speech was that it was the first speech by the Prime Minister to the Parliamentary Press Gallery and he made six points by which a Labour Government would reduce rates. Three of them are particularly appropriate to our debate. The first was that he would Restore the local authorities' right to raise capital through the Public Works Loan Board. The second was that he would Make interest rates reasonable. The third was that he would Stop profiteering in urban land, so reducing the cost of local authority expenditure on housing and amenities. Those were the three major proposals by the Prime Minister in a major speech prior to the General Election.

Examine what has happened to those three suggestions in practice. First, let us look at the Public Works Loan Board. When the Prime Minister made that speech the average rate of borrowing from the Public Works Loan Board was between 5 and 6 per cent. Today it is between 8¾ and 9⅜ per cent. As to the operation of the Public Works Loan Board, in the year 1963–64 when the Prime Minister made that speech there was one change in the rate. In the year 1968–69 there have been no fewer than 12 changes in the rate, all increases.

The second point suggested by the Prime Minister was that he would "make interest rates reasonable." When he made that speech Bank Rate was 4 per cent.; today it is 8 per cent. The third point was that he would Stop profiteering in urban land, so reducing the cost of local authority expenditure on housing and amenities.

The Financial Secretary to the Treasury (Mr. Harold Lever)

I do not want to deprive the hon. Member any amusement, but we are debating high interest rates and unless somehow he relates this to high interest rates—[Interruption.] I am addressing myself to the hon. Member through the Chair. I am not complaining that this is out of order, but he will be making assertions on this point and I am not prepared to deal with it.

Mr. Walker

I have never heard such an absurd remark from the Government Front Bench. I am sure that the Minister will not want to deal with it, but if he is suggesting that interest charges by the Public Works Loan Board and Bank Rate have nothing to do with it and the cost of loans has nothing to do with the debate, he cannot understand the Motion.

Mr. Lever

I am referring only to the third point about the cost of urban land. I have had no notice of this and have not come prepared to give any reply on this. I have come, of course, prepared to deal with the two other points the hon. Member has raised.

Mr. Walker

I should have thought the Minister would fully understand these matters and the twofold effect of higher capital costs and higher interest rates which have a dramatic effect on local authority finances. To illustrate the adverse effects of these interest rates, one has to show the higher capital costs which this Government have created. One can recognise the Government reluctance face that issue.

As to increased capital requirements which have to be serviced by this high interest rate, a whole series of Government policies have added to them. First there is their policy of saying that items should result in an increase in rents which are capitalised. The particular rate of interest operating today will in itself have a very adverse effect on local authority finances. The constant spate of circulars from one Ministry after another urging local authorities to go in for new capital expenditure adds to the burden, and the Government's refusal to relieve capital costs of some local authorities by allowing them to sell houses is another factor in this case.

The Government themselves have added considerably to the cost of capital projects by such measures as S.E.T., the import surcharge, devaluation, National Insurance contributions and petrol and transport costs. The Government, through the cost of borrowing, have increased the capital requirements of local authorities, and the major factor is the interest rate itself.

Looking at the Public Works Loan Board, I hope the Minister will give some explanation of the violent speed of changes in its rates in the last 12 months. I will give details of the medium-term charge on the lower rate in the last 12 months. On 28th September it was 7⅝ per cent., on 9th November, 7¾ per cent., 23rd November, 8 per cent., 21st December, 8⅛ per cent., 11th January, 8¼ per cent., 1st February, 8½ per cent., 8th March, 8¾ per cent., 22nd March, 8⅞ per cent. How can any local authority plan expenditure when the Government fluctuate the basic rate of interest to the Public Works Loan Board in the manner in which this Government have done in the past twelve months? I hope that the Government recognise the very real burden involved for the local authorities concerned.

In Birmingham the increase in interest rates is costing something like an extra £1,750,000, or a general rate equivalent of 8d. in the £. In Leeds, in the rate notice sent out to the ratepayers, the local authority, quite rightly, lists the main causes of higher expenditure in 1969–70. The increased cost to that local authority of higher interest rates on loan debt is no less than £1,391,000. Last year it cost the Greater London Council an extra £1,200,000, and if Bank Rate continues at its present level this year, it will cost an extra £2 million in purely additional interest rates. This is the extent of the enormous burden being placed on the major authorities.

There is also an enormous burden being placed upon some smaller authorities. As part of their housing policy—and it is remarkable that there is no one here from the Ministry of Housing and Local Government, such is the complete lack of interest by that Minister—

Mr. Harold Lever

The hon. Member must know that my right hon. Friend was here. He was informed that this Motion was to be withdrawn and he was released. Happily, I stayed on, although I was so informed, too.

Mr. Walker

The right hon. Gentleman concerned was in this House the moment before we were ready to go ahead with the debate. It is remarkable, if he then discovered that it was to go on, that he should decide to absent himself from it and that no members of that Ministry are here. It is absolutely remarkable, and I suggest to the hon. Gentleman that he should inform the Minister that the debate is now taking place and that someone should come here.

I want to mention how very hard hit are certain areas which have taken on major housing projects. The effect of this high interest charge will particularly affect those local authorities which have agreed to tackle overspill housing projects. A whole host of local authorities have been persuaded to accept major expansion programmes to deal with the overspill problems of the major cities.

My hon. Friend the Member for Bromsgrove (Mr. Dance) is particularly affected in his constituency, and the town of Droitwich in my constituency is also affected in that it agreed to accept, under some pressure, overspill from Birmingham, and to enlarge the town. Those particular local authorities are more hard hit because they have to put in major sewerage schemes, they have to provide amenities, as new, and they have an enormous capital grogramme. What is now being found is that local authorities which were originally told that there would be no great burden upon their ratepayers are having steep increases in their rates because of the changes which are taking place in the borrowing rates for these local authorities. I hope that this matter will receive the urgent attention of the Government.

In this context there is little need for me to make out a case to this House on the appalling burden being placed upon local authorities. It will result either in a substantial reduction of basic services or a very big increase in rates for the coming year. When hon. Members opposite talk of the adverse effects of higher council house rents, I hope they will recognise the degree to which council house rents are directly affected by the high rates of borrowing. I will give an illustration, brought to my attention today, of a typical small northern local authority which possesses just over 3,000 council houses. The cost to that authority of borrowing money for those council houses, in the housing fund in 1966–67, was £82 per house. For the coming year, the cost is estimated, if Bank Rate continues at its present level, as being something like £117 per house.

Take into account the whole of the increase in the Exchequer grant in that period, and we find that the amount left for the local authority to pay is £90 11s. compared with £62 in 1966–67. If it were to meet this from council house rents alone, it would have to put them up by something like 11s. per week, just to meet the cost of extra interest charges which have not been met by Government grants. I hope that when the Minister so gleefully pushes the burden of increased housing costs on to ratepayers instead of council house tenants, he will recognise that it is the fault of his own Government that there is such a desperate need for the rents of these council houses to be increased.

Likewise on the question of roads and highways, and here the Treasury Ministers know full well that a 15 per cent. reduction of expenditure on secondary roads by local authorities in the coming year has been ordered. That was bad enough, one could argue perhaps foolish enough, but on top of that, out of the fund for highway improvement, authorities have to meet the enormously increased borrowing costs, which are particularly adverse to that sector where capital costs are so high. As a result of the Government's interest rate policy to local authorities, housing rates and highways—basic services—will be adversely affected. Alas, the Government have no policy to this end at all.

I want to express a real and deep disappointment on the part of local authorities that the Government have made no move to assist them with their borrowing problems. Indeed, by the Budget, which will be debated later, we see that local authority borrowing has been discriminated against by this Govment, with very severe adverse effects. It would be out of order for me to discuss the proposals for the gilt-edged market put forward in the Finance Bill, but it will be in order for me to point out the very considerable decline which has taken place in corporation stocks as a result of no action being taken to assist them.

At present London County Council 5½ per cent. 1982–84 stocks are on a redemption yield of £9 18s. 6d. per cent. Any Government should be ashamed that they have so mismanaged our nation's financial affairs that the major local authority in this country has to raise money on a redemption yield of virtually 10 per cent.

At Bristol a similar rate applies, and one can look through the whole of these corporation stocks and realise that any new local authority coming to the market will have to pay something like 10 per cent. to borrow money for major projects.

In 1963, shortly after he became Leader of the Labour Party, the Prime Minister decided that rates of interest charges to local authorities was a matter which affected the electorate almost more than any other single feature. It is my hope that when it comes to the next election the electorate will agree with his decision and judge this Government on their abominable failure to provide rates of finance which are tolerable and decent.

Mr. J. M. L. Prior (Lowestoft)

On a point of order, Mr. Deputy Speaker. This debate is primarily concerned with the Ministry of Housing and Local Government and the interest rates charged to local authorities. How can the House debate this Motion adequately when there is not a single representative present from the Ministry of Housing and Local Government? There may be many questions put by my hon. Friends on subjects concerned with local authorities, interest rates and the operation of housing subsidies, which are concerned with interest rates, but there is no one here to answer them. Is it not a grave injustice to the House, and also very disrespectful towards it, that there should be no representative from the Ministry of Housing here? Are there not four Ministers in the Ministry, and is it not shameful that not one of them can turn up for an important debate like this? What can we do to protect our own interests and the interests of our constituents?

Mr. Deputy Speaker (Mr. Harry Gourlay)

I have listened with interest to the hon. Member's submission, but which Minister is on the Front Bench is not a matter for the Chair.

Mr. R. W. Brown (Shoreditch and Finsbury)

Further to that point of order, Mr. Deputy Speaker. I submit that this matter ought to be cleared up a little further, because nothing that the hon. Member for Worcester (Mr. Peter Walker) has said yet involves the Ministry of Housing and Local Government.

Mr. Deputy Speaker

Order. I have ruled on the point of order.

5.21 p.m.

Mr. R. T. Paget (Northampton)

I have always been an opponent of the kind of economy which seeks to stabilise itself by high interest rates, but when I hear the Conservative Party, which has been the apostle of that sort of finance and that sort of policy, complaining of it, I think that it is demagogy at its worst. This is precisely the position of local authority borrowing, once one launches out upon the slippery slope of balancing an economy and deflating by increasing interest. That is the policy which was started by the Conservatives and, to my personal intense regret, was continued by the Labour Party.

I come from a banking family and I have been brought up on the basis of certain principles. Among those are these: first, one must recognise that every bank is always insolvent. It is its job to be insolvent. It is its job to lend money that it cannot repay if all the depositors ask for it at once. That is a business which can only be carried on so long as the depositors are totally confident that the reserves are adequate to meet their demands as and when they are required. The moment one gets away from that situation, the moment one begins to have to pay risk rates to one's depositors, one is out of banking and into money lending. Then one gets into all the problems which ensue from that situation.

That is precisely the trouble that we have got into. In effect, by making sterling convertible we made ourselves bankers. We opened our doors to do a banking business and allowed other people to use our currency. That was business so long as sterling commanded total faith. The moment it began to command less than total faith, we found ourselves in a position in which we had to pay risk rates of interest in order to attract the deposits which we needed to support sterling.

The dollar itself began to get shaky, and so the dollar rates went up. We reach a situation in which one is approaching 10 per cent. money and, having to pay this kind of rate to support sterling, we then find that we have to make that the rate internally, because one cannot pay one rate to the foreign depositor and a lesser rate internally. One is then faced with a situation in which the tribute being demanded by those who have 8 per cent. or 10 per cent. is plainly intolerable to the rest of the community unless one writes off the debts on which the huge rate of interest has to be paid.

So one finds that instead of high interest rates absorbing inflation, they in fact impose it. So long as we have this kind of rate of interest, nobody can believe in money because nobody can believe that the non-possessors will tolerate that rate of tribute unless the debt is written off by inflation. With that inflation one gets the kind of absurd situation with which we are faced today.

The other day a civil servant came to me and said, "I am ceasing to be established because I want a lump sum to pay off the mortgage on my house. I cannot afford 81 per cent." I said, "You are absolutely crazy. You are not paying 81 per cent. Half of your mortgage is written off by deflation. The capital is being written off by at least 4 per cent. per annum. That reduces your mortgage interest by nearly half; and the whole of your mortgage interest is deducted from your Income Tax, and you are on the full rate. So what you are really paying is something under 1 per cent. Invest in the unit trusts and take 10 per cent. capital appreciation."

That is wonderful business, and if anybody will lend me money at anything like 10 per cent. I will take it. It is wonderful business, if one is on a high rate of taxation, to borrow and it is crazy to lend. Thus we reach a situation where the sources of lending are dried up.

While it is an enormous advantage to the borrowing taxpayer, local authorities do not enjoy a similar advantage. Since local authority rates are substantially settled by the rates of interest, and since the rates of interest have to be paid in effect by rent from people who generally are not paying Income Tax at the full rate, the relief on high interest rates is nothing like what it is to the rich person. So, in effect, we have a situation in which the rich are getting richer faster than they have ever done in history, and for less effort.

One can put up the taxation on income to any level one likes, because the very act of putting up that taxation on income boosts the capital value of the shares, and the capital accretions outstep any additions to taxation which may occur. It is really a lamentable state of affairs, but for the Tory Party, which has been the author of this whole system, to complain of the results of what it has wished on to a Labour Government seems to me to be a most hypocritical and demagogic thing to do.

I utterly condemn my Government for having accepted Conservative financing which has landed them where they are now, but right hon. and hon. Members opposite are in no position to make that condemnation.

5.30 p.m.

Mr. Arthur Jones (Northants, South)

I followed with interest the speech of the hon. and learned Member for Northampton (Mr. Paget), and I noted his condemnation of the Government's policy. Although he tried to establish a similar criticism against this side of the House, he failed to do so because he did not take into account the differing levels of interest which applied when we were responsible for affairs as compared with those ruling today. That is the clearest possible evidence of the failure, which the hon. and learned Gentleman tried to explain away—

Mr. Paget

I am obliged to the hon. Gentleman for giving way so soon. The point is difficult to explain, and I am sure that it was my fault. The whole theme of my speech was that, once one tries to balance one's economy and maintain one's currency by increasing interest rates, that process goes on and on and up and up. It climbed under the Tories. It has climbed since.

Mr. Jones

With respect, the fallacy in the hon. and learned Gentleman's argument stems from his failure to appreciate that it did not climb repeatedly under a Conservative Administration. The rates varied substantially during our 13 years, both up and down. The present level of interest rates is the clearest possible indication of the difficulties which the Labour Government brought on themselves. The Conservative Government, on the other hand, were able to handle the financial side of our economy with success during their 13 years.

I entirely agree, however, with the hon. and learned Gentleman in his devastating argument against the financial policy of his own Government and his indictment of the circumstances which their policy has brought about, circumstances due essentially to the high level of public expenditure and the running of great external indebtedness, stemming mainly from the policies which they have followed, but initially from the regrettable attitude of the present Prime Minister in destroying confidence in sterling way back in 1964. Confidence has not been restored or regained since that time, and I predict that it will not be under the present Government. The Government are demanding a high level of expenditure on local authority services without finding the means to meet the financial commitment involved.

I am sure that I speak for all my right hon. and hon. Friends when I say how pleased we are that the Minister of Housing and Local Government has now joined the debate. I thought it a little unfair that his hon. Friend the Financial Secretary to the Treasury should have been left to carry a somewhat awkward burden for the remainder of the debate.

It is strange to see the extent to which the Government have not sufficiently recognised the incidence of the high level of interest rates and their effect on local government budgeting. There was only one reference to this point in the Minister's Report on the Rate Support Grant Order of 1968. I quote from paragraph 15, page 6 of the Report, in which it was said: It takes into account the increase in loan charges … the reference there being to expanded expenditure on education.

In contradiction to that, however, the Department of Economic Affairs in its Progress Report of March this year, referring to local government expenditure on page 4, said: Debt interest is excluded because it is a function of other expenditure, largely in the past, and is not subject to independent control as a programme, There seems to be a clear contradiction there in the Government's attitude towards the level of interest rates in local government expenditure.

To emphasise the point which I made in reply to the hon. and learned Member for Northamption, I refer to the level of interest on seven-day money in recent years. At 31st December, 1963, the rate to local authorities for seven-day money was 4.3 per cent. In December the following year, 1964, it has risen to 8 per cent., an indication of the effect of the Government's policy and the Prime Minister's statements during the short period in 1964 when the Labour Government were in office. By December, 1968, there had been a slight fall to 7.6 per cent.

Now, I quote from Housing Statistics No. 12, for February, 1969, issued by the Ministry of Housing and Local Government seven-day money on 17th April this year was at 8.4 per cent., with three-month money at 8.6 per cent., a clear indication of the view of the market on the movement of interest rates immediately ahead.

It is at their pooled rate that most local authorities charge their loans to the various departments. In December, 1966, according to the Institute of Municipal Treasurers and Accountants, the average pooled rate was 5.14 per cent. The high interest rate period which we are now experiencing, with a high level of borrowing, must put up the pooled rate substantially for many years ahead. What does the future hold for local authority borrowing?

A Bank Rate of 7 per cent. used to be considered an emergency rate, but the present 8 per cent. seems to be regarded as normal under the Government's policy. Interest rates are rising throughout the world, and one would be bold to predict that by the end of the year the general level for borrowing will be less than 10 per cent. Indeed, as my hon. Friend the Member for Worcester (Mr. Peter Walker) pointed out, the move in the past few days since the Budget Statement leads one to think that the interest rate will be at 10 per cent.

The extent of the commitment of local authorities in the capital market is indicated by the following figures of annual capital expenditure, which include a figure of about 10 per cent. from revenue and resources. Local government loan indebtedness has risen from £4,615 million in 1957 to £9,280 million in 1966. The current total is in the region of £10,000 million, of which just over half is for housing. These figures emphasise the borrowing problem which local authorities face.

It is noteworthy that it is county councils which have a rapid expansion of population to deal with which are meeting the greater proportion of their expenditure from capital rather than from resources. For example, Warwickshire, Surrey and Buckinghamshire are meeting only 9 per cent. from revenue and funds, leaving 91 per cent. to be raised in the money market. It is clear that heavy penalties are being incurred for a substantial number of years ahead by loan financing in times of high interest rates such as we have now.

The Public Works Loan Board, which has special arrangements for the development areas, is prepared to meet one-third of local authority funding, but the present rate on quota is no less than 9 per cent. The figures, therefore, clearly demonstrate greater and greater borrowing at steeply rising rates of interest, to which must be added the increased costs arising from devaluation, rising excise duties and an almost perpetual state of financial crisis—a nightmare situation for local authority treasurers.

The new Housing Bill, upon which so much hope rests for the conversion and improvement of properties, may well flounder in circumstances in which local authorities and private owners, on whom the success or failure of the scheme depend, could well find the present interest rates penal to the proposals which the right hon. Gentleman and his colleague advocate. We have yet to see the full impact of the recent substantial rise in interest rates upon housing subsidies Under the 1961 Act they cost the Exchequer about £17½ million a year. Under the most recent Act, in 1967, the cost is already £26 million. It will be interesting to have the Government's idea of the extent to which they think housing subsidies will rise under the recent Act.

Statutory Instrument No. 1184 of 1968 indicates that the representative rate of interest for dwellings completed for 1968–69, which is fixed annually, was fixed last July at 7.07 per cent. What is that rate to be for the current year when it is fixed in July? We could well see a rate of about 9 per cent. What effect will that have on the level of housing subsidies under the housing programme? It will be a fantastic housing subsidy; I think that in a year or two the level of annual subsidy will be equal to the whole of the previous housing subsidy level. With the Government's failure to require selectivity in housing rents, this is a completely unnecessary burden of expense on the Exchequer.

The Government have a clear inability to take appropriate decisions across the full spectrum of our economic affairs. Is it for good reasons or mere partisanship that they have not? They have handled issues piecemeal, setting off one pressure against the next, as time and circumstances seem opportune, a disastrous policy for which the country is now paying a heavy price. High interest rates, which we are discussing today, form only one piece of evidence of an overall financial failure for which the Government stand condemned.

5.42 p.m.

Mr. R. B. Cant (Stoke-on-Trent, Central)

In the early stages of this debate I thought that it was likely to generate just as much heat as the earlier episode on student power, but the temperature seems to have fallen considerably.

As one who has been a member of a county borough finance committee for a number of years, I cannot welcome the high interest rates that have emerged in the recent past any more than anyone else can. We have had some horrifying details of their impact. I wonder how Stoke-on-Trent County Borough managed to maintain its rate at the same level this year as last year and the year before. Of course, we have some very remarkable people on our council. Some of them may shortly be losing their seats, though I hope not.

What I suspect as I listen to this debate, or financial seminar, is that a little humbug is creeping in. I am not at all impressed by the strange dichotomy that has been introduced in dealing, for example, with local authority housing as distinct from private housing. This is an important point. Local government is subject to the general inflationary pressure in the country—and not only here, but elsewhere in the world. It would be very remarkable if housing costs, which might stem from the capital cost of land or building or interest rates, could be held down dramatically or allowed to rise only slowly in the public sector whilst in the private sector prices, mortgage repayments, and so on, were going up. Therefore, in a sense, what is happening in local government is happening elsewhere in the economy, though I concede that we should not welcome it just because everybody is sharing it.

What distresses me a little is that the particular pressures that are building up are undoubtedly doing some of the things that the Opposition have implored the Government to do more than once. Having been a member of a local authority, I would be the first to concede that nothing seems to have had a bigger growth rate in the economy than local authority expenditure. It is very nice to be on the receiving end of a 10 per cent. per annum increase in the amount of money one spends. If hon. Members opposite argue that public expenditure, of which local government expenditure is a part, is one of the main reasons for the generation of current inflationary pressures about which we hear so much, they should applaud anything the Government will do that will depress this rate of growth in what they regard as a particular evil.

Even more serious in our discussion of of the question of interest rates and local authorities is that we have been exhorted by hon. Members opposite to pay far more attention to the management of our economy to what it is now fashionable to call money supply. What I think we are seeing in effect, although I have not yet interpreted the more esoteric passages of the Budget speech of my right hon. Friend the Chancellor of the Exchequer, is not a rate of interest that has risen because the Government want to use it as an instrument of policy.

What we see is something which is emerging as a residual of the implementation of a type of monetary policy which I thought all hon. Members opposite greatly applauded. Where the humbug comes in is that they cannot have it both ways. If they argue that our economic salvation is utterly dependent on the use of this new type of policy, they should be reasonable enough to accept the consequences, even though they might have implications for a particular type of government—local government—which is much dearer to my heart, and which I find much more interesting, than central government.

It may be that we have reached a stage where we must accept this strand of demand management policy as the only weapon remaining to us to control the situation emerging in the Western world. We are becoming increasingly conscious that all the policies we have used to date are budgetary policies. Dare I mention the phrase "our incomes policies"? Our conventional monetary policies are incapable of restraining the growth of inflationary pressures. They are tantamount to a slap on the wrist when what is really needed for these dynamic economies, in monetary terms, is a crack on the head.

I should like to extend this argument a little, because we often do not like the consequences of policies, and have tended—even hon. Members opposite—to put all the blame on the Americans. We have said, in effect, that high interest rates are a consequence of American policy, and that we are the victim of this. That is perfectly right, but the Americans are doing in a rather drastic and formidable way precisely what hon. Members opposite think should be done in this sort of situation.

That terrible man, the President of the United States, is clamping down most firmly on the American economy, and the consequence is that interest rates are rising and the good financial capitalists, to whom my hon. and learned Friend the Member for Northampton (Mr. Paget) referred, are taking evasive action. They always do. They are raiding the Eurodollar markets, and although I think that the operations of the Euro-dollar markets are much more complicated than many people appreciate, this is having the effect of increasing the pressures towards higher interest rates.

I do not want to pursue these matters much further, but would merely say that we are in a historical phase. I think that it was Keynes who talked confidently about his doctrine producing the euthanasia of the rentier class. Now we have a situation in which that class is not dying a victim of cheap money but, rather paradoxically, refuses to flourish on the basis of dear money. We must not extend that to the gilt-edged market, but I think that we should bear it in mind, and I appeal to hon. Members opposite to do so, because they are all reasonable men. We are going through a phase of financial history in which the United States is dictating a certain policy. This is being supported by the Germans, because the German Bundesbank will no longer support the German bond market.

In this situation, not only for external reasons, but also for internal reasons, we are having to apply policies which inevitably produce levels of interest rates that nobody likes. It may be, and we can only hope, to whatever part of the House we belong, that the application of these policies will for once be successful in reducing the inflationary pressures within the economy, so that when we talk about a rate of interest net of tax, net of inflation, it will be a realistic and acceptable rate which will be a useful basis for local authority operations as well as operations in the private sector.

5.53 p.m.

Mr. Michael Alison (Barkston Ash)

I very much enjoyed the speech of the hon. Member for Stoke-on-Trent, Central (Mr. Cant), but I am a little disappointed that he did not introduce the name which I consider to be the key name in the Government's present policy, namely, the individual some people call Mr. Marty Feldman and whom the cognoscenti know to be Milton Friedman. It is a name to which we should pay more attention and I propose later to invite the attention of the Financial Secretary to it.

We should pause to reflect on what I can only describe as the perverseness of the policies of the Labour Government. Whichever way one looks, the only consistent theme to be found in their policies is the perverseness of the ways in which they react. Let me give some examples before coming to their current policy on rates of interest. I take, first, the deployment of manpower and the famous shake-out which was meant to strengthen industry. Where was the shake-out most fruitful? It was a shake-in to the public administration which we all know to be an absolute standard-bearer in the export drive! So much for the famous shakeout.

Next we have the doctrine of investment grants discriminating against service in order to strengthen manufacturing industry; but the boom in investments is in supermarkets, in retail distribution. Consumer expenditure became the focus of a concentrated attack by the Chancellor of the Exchequer in the 1968 Budget. It was found that, like trying to push a rubber ball into a swimming bath—it pops up twice as high the moment one takes one's hand from it—this was the perverse outcome of Socialist policies to restrain consumer expenditure. Prices and incomes policy speaks for itself. It tries to screw down a safety valve on a boiler and the resulting explosion obviously sends both prices and incomes twice as high as they would have been if left alone.

We come to the latest and in some ways the most damaging example of perverseness. I have only to draw attention to the extraordinary irony that, on the day that the Chancellor introduced a Budget which had the over-riding aim by means of taxation and by means—and I pause to emphasise this aspect—of reversing the conventional and in some ways traditional policy of borrowing, namely, by introducing a policy of disborrowing by the Government or of debt repayment, to stabilise or at least control consumer expenditure and at least reduce or perhaps only stabilise the money supply—this was part of the Chancellor's aim in trying to cover part of his expenditure by fiscal means accompanied by debt repayment—the Minister for Planning and Land solemnly recommended to the Greater London Council that the greater amount of its capital expenditure on housing should instead be charged to loan."—[OFFICIAL REPORT, 15th April, 1969; Vol. 781, c. 980.] At the very moment that the Chancellor was recommending that the Government reduce their borrowing requirement, one of his colleagues was suggesting that one of the biggest, if not the biggest, housing authorities should switch from seeking to increase its financial resources by rent or rate increases to borrowing. Could anything be more absolutely contrary to the whole strategy of the Budget and more utterly perverse in its effect?

It is custom-built, particularly in relation to the housing operations of the Greater London Council, to run plumb counter not only to the Friedman doctrine, which is alleged now to have found a nesting place in the Treasury, but the whole strategy of the Budget.

I do not know whether the Minister of Housing and Local Government, or the House, can appreciate what is involved in encouraging local authorities to borrow, but I am certain that the Financial Secretary—and perhaps this is why he has been asked to wind up the debate—is only too well aware of what is involved in encouraging local authorities to borrow to cover their financial requirements rather than to do it by rate or rent increases.

I will bore the House a minute by referring to one of one of those dreadful tables in the almost horrendous publication "Financial Statistics", which I know the Financial Secretary, if nobody else, studies and assimilates. The hon. Gentleman will recall, if he has looked at that dreadful publication recently, that Table 25 shows how much local authorities borrowed in 1967–68, the latest year for which figures are available. My reading of the table suggests that in that year local authorities borrowed about £1,000 million. The key point in this respect is, not the total of £1,000 million, but the fact that far and away the largest bite of what was borrowed—nearly £500 million—in the latest year for which financial statistics are available was borrowed via the banking system—that is, from what "Financial Statistics" rather coyly describe as "banks and other financial institutions". That is much more than was borrowed from the Public Works Loan Board.

The fact here is only underlined and compounded as to the felony when one considers how much short-term local authority borrowing is outstanding at present. This is given in Table 26. Over half of about £1,870 million short-term borrowing outstanding at present is accounted for by overdrafts and other short loans—that is, seven-day money, three-month money or 12-month money at the banks and other financial institutions.

I come to a point made most cogently by my hon. Friend the Member for Worcester (Mr. Peter Walker). It is not surprising that local authorities are tending to go to banks and other financial institutions and borrow at the shortest possible length, because, with very high interest rates, who wants to borrow for five years or more and who wants to get tangled up with the immensely fluctuating interest rates applied by the Public Works Loan Board? The great ambition of local authorities must be to borrow as short as possible so as to cash in on any reductions. Therefore, it is not surprising that there is immense emphasis on short-term borrowing by local authorities via the banking system and other financial institutions.

I come to the real burden of my charge of perversity against the Government. Against a background of immense emphasis in local authority borrowing on short-term money via the banking and financial system, the Government actually now deliberately encourage such an increase in borrowing, although the effect is, as is well known in the Treasury and certainly in the City of London and the banking system generally, that nowadays short-term local authority money at seven days or three months is regarded by the banking system as the equivalent of Treasury bills: it is a highly liquid, totally gift-edged form of investment, and it has come so to be accepted.

I am sure that the Financial Secretary will be only too glad to confirm this—as part of the paper that a bank can hold in its portfolio constituting and comprising that part of its holdings of liquid assets.

Mr. Harold Lever

indicated dissent.

Mr. Alison

I beg to differ from the Financial Secretary, whom I see shaking his head. I advise him to ask people in the City of London and further afield how they regard short-term local authority money falling in with the regularity that it does. It constitutes for all practical purposes part of the 28 per cent. liquidity ratio which they need to maintain their volume of lending.

Mr. Harold Lever

indicated dissent.

Mr. Alison

It is no good the Financial Secretary shaking his head. This money falls into too easily and too readily, and it comes to be regarded for all practical purposes as part of the basic assets banks need to hold to increase their credit extension and deposit creation. This is a fact. The Financial Secretary cannot get away with it by shaking his head. The short-term local authority money with a virtual Government guarantee is part of the liquid assets base of the banking system.

Mr. Cant

Is it so, then, that the Bank of England will readily discount these quasi-bills?

Mr. Alison

The Bank of England may not discount first-class local authority bills, at least formally. In the same way that the banking system can get round any shortage of Treasury bills at any particular moment by letting those that they have fall in and thereby getting the cash they need to maintain the general level of their liquidity, so a very high holding of local authority money on very short term gives the banks that total security which they need to elaborate and expand on their other deposit creating activities with this huge volume falling in. It has an immensely lubricating rôle in the whole system of credit creation.

The Government at this very moment in time are deliberately increasing, for banking and financial institutions, that part of their assets base comprising the most liquid and secure form of asset.

The important question I want to ask the Financial Secretary in this debate is this, and it arises from the Chancellor's basic Budget strategy. Almost the concluding words of the Chancellor in the Budget debate were that he hoped this year to be able to pay back debts as the result of his huge revenue surplus—I think that the Financial Secretary will confirm this figure—of something approaching £800 million. I think that the Chancellor said £807 million.

Can the Financial Secretary tell us which sector will have this debt repaid to it? If the sector which is to have this debt repaid to it is that of the ordinary public—the members of the public such as ourselves outside the banking system—this will have no effect at all on the money supply, as the hon. Member for Stoke-on-Trent, Central will agree. If the Government hand back from the taxpayer to some erstwhile lenders some of the money they have lent to the Government, those erstwhile lenders will merely use that money to lend to others to pay their taxes; so the taxpayer pays his taxes with the money that the Government have paid back to the lender.

We cannot believe that this is what the Chancellor will do. The debt the Chancellor will more probably repay will be short-term—paying off Treasury bills in order to try to reduce the credit-creating base of the banking system. If at one moment the Chancellor is paying off Treasury bills and at the next moment giving the banking institutions this highly liquid instrument in the shape of short-term local government money, he is being totally perverse. Only since he will not be able to give them quite as much money as he pays off in the way of Treasury bills, the effect will be further to increase interest rates.

By this very process of the Government's trying to pay off debt, on the one hand, and at the same time to encourage public authorities to raise further loans, on the other, they are almost entirely cancelling out any good they want to do and at the same time probably giving a stimulous to interest rates. It is an example of the hopelessly blind-eyed perversity of the Government; and the sooner they scrap all these policies and get to the country like the General did, the happier we shall be.

6.8 p.m.

Mr. R. W. Brown (Shoreditch and Finsbury)

I am sure that the hon. Member for Barkston Ash (Mr. Alison) will forgive me if I do not follow him too closely into the ramblings to which he treated us at the end of his speech. The House will not be slow to understand that it is not by accident that we are discussing local authority interest rates tonight. It is more than a coincidence that in two weeks' time elections are to take place. It was predictable that as soon as the hon. Member for Worcester (Mr. Peter Walker) assumed the post of a shadow Minister he would try to find a gimmick. This is a typical example.

The hypocrisy of the Tories has already been referred to. It is more than evident tonight. The quandary they are in, however, is that when they sought to take over the local authorities three years ago they made the most extravagant promises as to what they would do. Those of us who have been in local authority work for many years have faced Conservative opposition over the years in being told what to do and how to do it. Now, when some of them have the chance to do things, we see clearly that they are utterly incompetent. They do not have a clue.

They are being controlled severely by the Conservative Central Office. That is why I have said before that local government bodies are no longer free associations of local authorities, but are clearly the political machine of the Conservative Central Office. Therefore, anything which they say must be taken in the sense in which it is said—that is, that the idea is to get the Government down and that if anything is expendable, the truth certainly is. We should have that clear in our minds when discussing high interest rates.

I agree with my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant) in regretting high interest rates. The difference between hon. Members opposite and myself is that I objected to them a long time ago. That was when a Tory Minister of Housing told me that it did not really matter.

When I listen to all this long harangue about local authorities being told to borrow on seven-day money, that is precisely what the spokesman of the party opposite said to me in 1952 and 1953 and right through till 1960. They were still saying it in May, 1964. I was one of those who insisted on building homes, but the Conservatives in those days did not want too many homes built. They put every impediment they could in the way of local authorities who wanted to do it. [Interruption.] I am prepared to give the hon. Member for Worcester a catalogue of events to show how it happened. I can show him legendary blocks of flats that were built.

When we built them, we did so in spite of the then Tory Minister. To try to make it easier for the party opposite to have their way and stop us building homes for the people, the then Minister—now Lord Brooke—said, "Of course, you will have to borrow on seven-day money. You will have to play the money market". We were asking for access to the Public Works Loan Board. The Minister told us that we could have only our quota and that after that we must play the money market. My authority at that time played the money market. We had about £3½ million on short-term money. [Interruption.] The trouble with the hon. Member for Worcester is that he never sees the argument through. He begins and ends at a convenient point, but he never understands it.

When we had to borrow short-term money all the way through, the Minister had the effrontery to tell us that that was scandalous. He said, "You now have more than 20 per cent. of your capital debt on short-term money". I replied, "But, Minister, you told us to do it". He said, "But I have changed my mind now". He thought that he could change in midstream. That is why the hon. Member for Worcester gave figures of outstanding debts. It is because many of us were forced by the Conservative Government to do those things. The rate on Public Works Loan Board money was 7⅛ per cent. even in those days, but the rate for money abroad was much less. The hon. Member for Worcester has not brought out that the rate for money abroad is now much higher.

The hon. Member should have made it clear that to help local government face the problem, an enormous amount of help is now being given right the way through, from rate support grant equivalent to about a 1s. 3d. rate, and that a whole series of other measures are being applied to help local authorities. Consequently, we now have it on authority today that the argument that we have not kept our promise is no longer true. The Conservative Party say that we ought to be spending more on housing, whereas formerly they argued that we had not been doing so. The argument is that we have not kept our promise of 500,000 homes a year.

Today, the argument of the party opposite is very different. They say that we are building all these homes and, consequently, local government has to spend more money. There is, for example, the increase in rates of the Greater London Council. The G.L.C. is proving itself to be the most incompetent local government group we have ever seen. I hope that next year, when the electors of London at last get their chance, they will throw this lot out lock, stock and barrel, although, of course, a very good attempt was made in the London Government Act, 1963, so to gerrymander and fiddle the boundaries that it cannot be done. I have no doubt, however, that the voters of London will decide to turn out the Conservatives and put back a competent administration.

The selling of council houses, as suggested by the hon. Member for Worcester, is not the answer. I would be more satisfied if the Conservative-controlled G.L.C. could make better use of its property. In my constituency, people are living in three- and four-bedroom accommodation when all they want is one bedroom, but the incompetent administration in County Hall cannot help them. The G.L.C. goes one stage further, however, and places on those people an enormous rent increase for a three- or four-bedroom property which they do not want and will not allow them to move to a smaller property where they would not have to pay so much.

It has been deliberate policy by the Conservatives over the years in local government to force people to borrow money. This is one of the things I objected to when I was chairman of a finance committee. The problem facing local government is to know how much to borrow short and how much to borrow on long term.

In the days of the Conservative Government, many of us were forced into a position of doing nothing. That was what the party opposite wanted. At the same time as they were pressing local government in these ways, they brought in the Rent Act, 1957. They wanted it to work in their interests more than anything else, with the result that we had the Milner Holland Report, which the Minister of the day knew all about long before that Report was ever published, because those of us who gave evidence to that Committee gave the same evidence to the Minister years before. The object of the Conservatives was to get the Rent Act working in order to get market forces operating and to make people pay far more for their rented property.

No case has been made tonight that the Government are not seized of the importance of the effects of high interest rates. The Opposition have shown themselves particularly vulnerable in the sense that they can only look back to their own history and see that they began the whole process and created the problems for local authorities. My right hon. Friend the Minister has to some extent been forced along the same path. In his defence, however, it must be said that he has given far more help to local government than any other Minister of Housing and Local Government we have ever had.

Therefore, whilst a case can be made that there are higher interest rates, it cannot be challenged that my right hon. Friend has done his best to ensure that the interests of the people can be taken care of if local authorities have competent administrations. Unfortunately, at the moment, many local authorities are being run incompetently by the Conservatives. The sooner we get them out, the better.

6.19 p.m.

Mr. David Lane (Cambridge)

I look forward to talking again to the hon. Member for Shoreditch and Finsbury (Mr. R. W. Brown) after the occasion, in about 10 days' time, to which he referred earlier. I wonder whether he will then be saying the same thing about the views of the average voter.

This is a timely debate for two other reasons than the reason mentioned by the hon. Member. One is that we have spent many days recently in the Budget debates looking at the national scene, and it is suitable now to turn, even in this short and curtailed debate, to the local scene.

The other reason why I welcome this debate now is that the report of the Royal Commission on Local Government will shortly be published and it is well that we should remind ourselves how much local authorities are at the mercy of decisions taken remotely in Whitehall.

For local government this has been a cold and joyless spring. In many parts of the country there were high hopes of improvements in the quality of life both for families and for the community. These hopes have now turned sour. Families, far from finding the situation any better, are' feeling the tide of costs and prices rising inexorably against them. We all know in our own communities how many desirable projects are having to be referred.

In today's debate we are considering the effect of interest rates on local authority finances. But if one translates that into human terms, what we are really discussing is one aspect of the effects of Labour's mismanagement on the lives of the citizens whom we represent. Other hon. Members have spoken about the controversial issues of national finance, the reasons that interest rates are so high, and the perversity of Government policy, a matter which was dealt with by my hon. Friend the Member for Barkston Ash (Mr. Alison).

I wish to concentrate upon experiences in my own constituency and the effects of the conjunction of circumstances on everyday life at the receiving end. My experience involves a city of about 100,000 inhabitants, not, unfortunately, a county borough, but a large municipal borough which carries out many of its own services. In one sense my constituency has suffered more than other places. In another sense, more relevant to the narrow issue of interest rates which is being discussed today, it has suffered less, but it has still suffered substantially.

As a result of the general financial stringency of the last few years, several capital projects are having to wait. They include an important car park, a sports hall and, perhaps most disturbing in terms of everyday living, schemes for badly needed central area redevelopment. These schemes may be delayed because the city council is already feeling in its purchasing policy the pinch of financial tightness. This may lead to a general slowing down in the improvement of the environment.

The only consolation for the holding up of these capital projects is that it has to some extent shielded my constituents from the effects of higher interest rates, for the reason that there are fewer loans than there otherwise would be to service. But the effect of higher interest rates has been bad enough.

I should like to give three examples of how this has hit my constituency. First of all, there is the problem of council house rents. Two years ago, in the early months of 1967, a rise of 25 per cent. in council house rents became unavoidable. A major cause was the level of interest even at that time which had to be paid on housing loans. Only a few months ago, in January, a further 10 per cent. rise was necessary just to keep the housing revenue account in balance, and the higher interest rates were again a main factor in that decision. No local authority likes to be forced to make rises of this sort, particularly at this time, even when it is able to some exetent to cushion their effect by a good rebate scheme.

The second example is in regard to loans made by the council for mortgages for prospective house purchasers. This is particularly relevant because only last week my council was obliged to raise its figure to the record level of 8½ per cent. for these loans. Four or five years ago there was virtually no restriction on local authorities making loans of this sort.

In my own constituency the local authority was able to help at least 50 families a year and, if necessary, could have helped more. But since that time, for a variety of reasons, the cost of buying a house in my constituency has risen by something over 30 per cent. and the loan rate for prospective purchasers has gone up to 8½ per cent.; and I would emphasise particularly that the amount of money available for 1969–70 has been reduced to no more than £28,000. If we compare the situation today with that four or five years ago in this fairly typical, medium-sized city, at that time the council was able to help 50 or more families a year. This year the council will be lucky if it is able to help 10 families.

Mr. R. W. Brown

The hon. Member is seeking to establish a case which is not always as he has put it. The Greater London Council in the four years from 1964 to 1968 loaned £193 million, whereas during seven years under the Conservative Government they loaned only £32 million. This does not tie in with what he is now saying.

Mr. Lane

I would like very much to debate with the hon. Member another time the various policies of the present Greater London Council as compared with its predecssors. However, I will not be distracted on that matter today. I am now talking about something of which I have more direct knowledge.

A third example is the effect of the total burden of interest which the city council has to bear as it touches individual ratepayers and other citizens who may not pay rates. Again, I wish to compare the situation a few years ago with that which exists today. In the early 1960s the council on its entire capital debt was paying an average rate of interest of 4 per cent. Today, its average rate of interest is about 6 per cent. The annual interest payments have gone up by at least £300,000 a year. On my calculation this means that purely on account of higher interest rates, leaving aside all other factors which have forced up local authority costs, the average family in my constituency is now having to pay £10 a year more for the services provided by the local authority than was the situation a few years ago.

I said earlier that other areas have no doubt been worse hit than mine. I know, for example, that in the development areas, where there has not been this restriction on loan sanction which has applied in my constituency, but where priority has rightly been given for slum clearance projects and for big urban road schemes and for other capital projects of that sort, the increased cost of servicing these additional loans will be that much greater; but it is bad enough even in the particular circumstances of the constituency which I represent.

What lessons do we draw?

Miss Margaret Herbison (Lanarkshire, North)

The hon. Member has given figures which the average family now has to pay extra because of the increases in interest rates. I do not know what determines an "average" family. But is he aware that, under the present Government, after the first child, for each child in an average family, or any other family, the family gets £26 a year more in family allowances?

Mr. Lane

One can bring in all sorts of considerations, and averages necessarily are unsatisfactory. I should be prepared to talk to any family, average or otherwise, about these matters and hear from them the various rises in taxes and in prices. However, I would rather not get further distracted at the moment.

I draw two conclusions from this situation. Whatever will be the future structure of local government after the Maud Report, it is highly desirable that local authorities should enjoy more direct financial control over a wider area of their own activities. I hope that this will be one of the messages which comes over loudest and clearest from the Maud Report.

Secondly, I conclude that, leaving aside the structure of local government, it is difficult to see any real improvement in the situation of local authorities, my own local authority as well as others, until competent management in city halls and town halls is matched by competent management in Whitehall. For frustrated citizens throughout the country, every month brings nearer the day when the direction of our national as well as our local affairs will again pass to the Conservative Party. That day cannot come too soon.

Mr. Alexander W. Lyon (York)

The hon. Gentlman says that the situation is entirely the fault of incompetent Socialist administration. What about the effect on local authority financing of the fact that there is now a subsidy which reduces the amount which the home-owner must pay in rates by about 1s. 3d. in the £? How does that affect the general liability of the average family in meeting the cost of local government?

Mr. Lane

I am well aware of that, but that is more than counterbalanced by the much higher level of interest rates which have existed for four years or more because of the perpetual lack of confidence in this Government.

6.31 p.m.

Mr. Terence L. Higgins (Worthing)

The debate, although somewhat curtailed, has been extremely interesting and very relevant. Perhaps one of the more interesting aspects is that when we are debating a Motion That this House regrets the serious effect of high interest rates on local authority finances the Government have not felt it necessary to move an Amendment but apparently propose to vote against it outright. We can only deduce from this that the Government are delighted at the serious effect of high interest rates on local authority finances. I shall return to that matter.

The point of my hon. Friend the Member for Cambridge (Mr. Lane) about the effect of high interest rates on the burden of the payment of local rates is absolutely crucial. The hon. and learned Member for Northampton (Mr. Paget) made an interesting speech. He said a number of things with which I would not wholly agree. It is true that the effect of inflation has had an impact on some aspects of house purchase. But that is no consolation to the rate-payer who may be paying rates for some house purchase project in which he is not involved.

We had a rather partisan reaction from the hon. Member for Shoreditch and Finsbury (Mr. R. W. Brown) who, I think, misquoted a figure. He deplored the fact that in 1964 the Conservative Government had urged his local council to go in for long-term rather than short-term borrowing. I should have thought that he would be immensely grateful for that. If it delayed until the Labour Party came to power, his local authority would be paying a far higher rate on the debts which it had at that time than if it had taken the advice of the Conservative Government.

There is no doubt that the country as a whole, and local authorities in particular, may have been misled by the Government's statements in the period just before the 1964 election. The Chief Secretary to the Treasury said in his election manifesto: More houses at less cost—by halting the rise in the price of land and lowering interest charges on mortgages. The Tories have had their ups and downs. Here are some of the things that have gone up: mortgage payments—because of the Tory Government's arrangement of high interest rates. The fact is that under this Government interest rates are higher than ever before, and they have been higher for longer than ever before. That should not be disregarded.

The picture had perhaps changed a little by 1966, when the Chancellor of the Exchequer said in his election address: Now we want your support to go ahead with a reduced cost mortgage and homeownership plan". It is true that the mortgage option scheme was later introduced, but very few people have taken it up partly because of the way in which it was invalidated by last year's Finance Bill. Only 9 per cent. of the people who might have taken it up have done so. Also, the increase in interest rates has adversely affected the scheme.

I wish to consider the overall effect of higher interest rates on local government. We must do so against a background in which the rate support grant has been limited to projects held at a figure of 3 per cent. for 1969–70 in real terms and at a figure of 5 per cent. for 1970–71 and in which local rates are a heavy burden at a time of general inflation and a form of taxation which is extremely regressive.

The hon. Member for Stoke-on-Trent, Central (Mr. Cant) said that we could not have it both ways concerning the relationship between monetary and fiscal policy. But that is precisely what we have had. It is arguable that we used monetary policy as an alternative to fiscal policy. What we have had under this Government has been, not only an ever-higher tax burden, but ever-higher interest rates at the same time.

That brings me to the interesting question which arises in the context of this Motion, namely, why the Government have a policy of high interest rates. There are a number of possible conclusions. It may simply be a consequence of the failure of the Government's economic policy that interest rates have increased. What is relevant is the real rate of interest rather than the money rate of interest. With a rate of inflation of 6.2 per cent., as we had last year, interest rates have inevitably risen. It may not be in the Government's policy to have a higher interest rate; it may simply be a consequence of their other actions.

Another possible view is that it is a deliberate act of policy to use a more higher interest rate approach, in harmony with a more active monetary policy. We must view this with some doubt because the Chancellor of the Exchequer, in his Budget statement, said: The reason I attach the greatest importance to monetary policy is not my sudden conversion to some obscure foreign cult."—[OFFICIAL REPORT, 15th April, 1969; Vol. 781, c. 1007.] The right hon. Gentleman went on to say that he did not propose to follow any obscure foreign cult. None the less it appears the Government are being much tougher on monetary policy. Perhaps this is at the back of their increase in interest rates.

We should not accept without grave reservations the kind of argument which we have heard recently from the Treasury Bench, namely, that the situation is the fault of the Americans and that the Government cannot adopt a more lenient interest rates policy because they must maintain a high differential between the American rate and our domestic Bank Rate. We must consider why that should be so. It would appear to be a matter of confidence. The Chancellor of the Exchequer sought to rebut this argument by referring to differentials between the United Kingdom and United States rates which existed under Conservative Governments. But at that time it was fashionable to use Bank Rate fairly actively, although never at the level at which it is now.

The Government at that time felt that interest rates were an alternative to higher taxation. We were going through a period when taxation was consistently reduced. But we cannot accept that that is the present reason why interest rates are high because taxation is increasing. It is much more likely that it is a deliberate act of policy by the Government. Or it may be that the I.M.F. is taking a strong attitude and insisting that the Government adopt a high interest rate approach to our economic problems.

Interest rates, and particularly those charged by the Public Works Loan Board, have never been higher. I should like to quote some figures for the edification of the hon. Member for Shoreditch and Finsbury. The increase in the lowest short-run rate of the Public Works Loan Board from August, 1964, or October, 1964, to the present time was 3⅛ per cent. There is an increase of 3¼ per cent. in the higher rate on the short-term. Even on the long-term lower rate there is a full 3 per cent. increase, and on the long-term higher rate a 2⅞ per cent. increase. This is a high rate of increase.

Mr. R. W. Brown

Will the hon. Gentleman give the comparable figures for 1951 to 1964?

Mr. Higgins

I will gladly give them to the hon. Gentleman afterwards, but I do not have them with me at the moment.

Mr. R. W. Brown

I think it will be found that they went up by the same amount, 2 per cent. and 3 per cent.

Mr. Higgins

Not at all. I categorically deny that. I do not have the specific figures, but I do not accept that they went up by the same amount in that period. I can perhaps help the hon. Gentleman by quoting some figures from the earlier period, although I am anxious not to delay the House for too long as I am under considerable pressure of time. The 1951 period was a period when rates had been brought down.

Mr. R. W. Brown

Three per cent.

Mr. Higgins

Rates had been brought down to 2.5 per cent. in 1951, and, of course, a subsequent increase took place when Bank rate for short periods went up to 7 per cent. I give the hon. Gentleman that point, but the rate at that time clearly could not be sustained and, in the event, was not sustained. This, of course, was a period of British monetary policy—

Mr. R. W. Brown

The way in which the Conservative Government were able to do it was by stopping local authorities borrowing from the Public Works Loan Board.

Mr. Higgins

Not at all. The hon. Gentleman will appreciate I am under severe presure of time, otherwise I would like to take this further.

My second point is that the instability of interest rates has been very great in recent years, and this makes it difficult for local authorities to plan ahead. As my hon. Friend the Member for Worcester (Mr. Peter Walker) said in his opening remarks, we have had no fewer than 12 changes in a year or so, and this must have an adverse effect on local authority planning.

In addition, we must take account of the joint effect on S.E.T. and the rate of interest. Local authorities pay S.E.T. on their construction work and also make a forced loan to the Government through the S.E.T. mechanism. Every increase in the rate of interest, therefore, necessarily raises the burden of S.E.T. on local authorities.

The total borrowing of the Greater London Council is approximately £70 million. A 1 per cent. on that is £70,000 lent to the Government free of interest for two months, which is a burden of about £10,000 for the G.L.C. The same pattern runs right across the board throughout the United Kingdom.

I would like to know what precisely is the Government's attitude on borrowing abroad by local authorities. There has been a significant change in the attitude of the Government towards borrowing abroad by nationalised industries. I have grave doubts about this. A point arose recently in Question Time about the possibility of borrowing in Germany by nationalised industries and what would happen if there were a subsequent revaluation of the Deutschemark. None the less there is a case for having a consistent attitude towards private industries, nationalised industries and local authorities. There is doubt whether local authorities are empowered to borrow abroad, and I should be grateful if the Financial Secretary will tell us precisely what the position is.

The effect of interest rates has been felt by local authorities in three main areas: first, housing, where about 50 per cent. of the total finance is carried on local loan capital; secondly, on the education programme where about 15 per cent. is on loan capital; thirdly, on roads, where about 10 per cent. is on loan capital, and of course on welfare services.

The overall impact of the Government's policies has been to make house purchase more difficult. It has been estimated that the number of people able to buy houses on mortgage has, since 1964, been halved because of the effect of increases in interest rates. If this is so, it necessarily puts a much bigger burden on local authorities who have to meet an increased demand for local authority houses despite ever-increasing interest charges.

In education, where interest rates are involving local authorities in ever-higher expenditure, in road programmes and welfare services the rate of interest now being charged by the Government, whether by a deliberate act of policy or because of the failure of their economic policy, is imposing a burden on local authorities which we believe is very severe. I am surprised that any hon. Member should do other than regret the effect of high interest rates on local authority finance, and I hope that everyone will support the Motion.

6.45 p.m.

The Financial Secretary to the Treasury (Mr. Harold Lever)

The hon. Member for Worthing (Mr. Higgins) was rather less than his usual sincere self in implying that if we vote against the Motion it is because we do not regret, in the terms of the Motion, the effect of high interest rates on local authority finance. Had the debate stuck to the terms and the letter of the Motion, and had it been presented as a dispassionate examination in the national interest of the problems of local authority finance, we should have welcomed and felt able to endorse the Motion. But when the Motion is presented to the House with an encyclopaedic range of demagogic and destructive criticism ranging through S.E.T., the increase in petrol tax and all the rest, I cannot advise my hon. Friends to give countenance to this demagogic presentation by voting for the Motion.

In spite of the fact that hon. Members have wandered somewhat from the subject—one of my hon. Friends said that they were all reasonable men—I am prepared to accept with more sincerity than that that they are all honourable men, and I am sure that they all regret, as everybody here regrets, the effect of high interest rates on local authorities, but they have unfortunately prejudiced the possibility of our joining them in the Lobby by the presentation to which they have treated us.

The hon. Member for Worcester (Mr. Peter Walker), in opening the debate, must have suggested to more than one hon. Member the rebuke of Dr. Johnson when he once said of a lady: Nay, madam, when you are declaiming, declaim; and when you are calculating calculate. If the hon. Gentleman had applied that rule to himself, his declamation would not have been impaired but his calculation might have been improved.

For example, I do not think that the hon. Member would have said to the House, as he did, that the local authority debt is £13,000 million and, therefore, a 1 per cent. change in the rate costs 4s. per week per family. He cannot want the House to believe that. The implication is that a 1 per cent. increase in interest rate has that effect; but nothing could be further from the truth. It would be true if the £13,000 million were all unfunded currently fluctuating debt where every interest rate change may produce an interest rate change on the whole debt, but of the total debt approximately £2,000 million is the unfunded debt which fluctuates in this manner, and, of course, the calculation per week per family is somewhat different if one deals with the debt where the interest rate fluctuates and separates it from the total.

Mr. Peter Walker

I did say 1 per cent., but I take the Financial Secretary's point. I did not specify 1 per cent. on the average rate paid by local authorities. The average rate paid by local authorities since this Government came to power has gone up by 1½ per cent.

Mr. Lever

That may be so with the average rate, but the hon. Gentleman was implying by his statement that every 1 per cent. change in the rate made the difference he alleged, whereas the 1 per cent. rate on £13,000 million never occurs except over a period of years, and certainly does not bear the implication suggested by the hon. Member. Hon. Members on both sides who have spoken know perfectly well the truth of what my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant) and my hon. and learned Friend the Member for Northampton (Mr. Paget) have said, that world interest rates are responsible for the increase in interest rates in this way. That is the first point which ought not to be disguised from our contemplation if we wish to contemplate this matter seriously. My hon. and learned Friend the member for Northampton regretted the fact that we had allowed the world interest rates to, as it were, affect our rates. My hon. Friend the Member for Stoke-on-Trent, Central was more realistic in believing it was not possible to isolate this country from the impact of world interest rates.

Of course, the prime nonsense behind the Opposition's argument today is "Interest rates have risen in this country; therefore this is due to the incompetence of the Government and their policies", the implication being that there is a gearing between interest rates and Government competence. I invite hon. Gentlemen who subscribe to so naive a notion to survey their own record after 1951, when they will see there was the most dramatic increase in interest rates. Without arguing whether it was desirable or not, I would say it goes against the theory of a correlation between competence and a low interest rate, because if there is this correlation the late Dr. Hugh Dalton must have been the most competent Chancellor of the Exchequer of the century.—[Laughter.] He may well have been. I have no doubt that he was.

In a sentence, because I do not want to go too long on this matter of world interest rates, although I will come to detailed policies—I am dealing only with world interest rates at the moment—world interest rates have risen, and only the most naive of people think we can isolate ourselves from world interest rates or that we ourselves have a decisive effect upon world interest rates. Neither of these two propositions makes any sense.

World interest rates have risen not because of any form of correlation between Government competence with interest rates but for a whole complex of reasons, one of which is that there is at present a tremendous sucking in of dollars from Europe by the American banking system and by reason of the loudly applauded and for years recommended measures which the American Government are now taking.

Of course, last year when I spoke to the financial mandarins of Europe they were all telling me that the Americans were ruining Europe and the monetary system by pouring out a flood of dollars into Europe. Now as I travel around, the same mandarins are asking me to tell the Chancellor of the Exchequer when he goes to America to ask the Americans to release back into Europe some of the millions of dollars they have been taking out.

We could have the most intriguing debate on this matter if there were more time available, but it is enough to say that it is a complex of world factors resulting from a world situation which has put up interest rates. I do not see how one can have the competence-interest rate in correlation made to deal with the effect of Eurobond rates, which were, for example, 6 per cent. in September, and 7½ per cent. in December, and now 8½ per cent., if one is lucky.

Mr. Peter Hordern (Horsham)

Would the hon. Gentleman now address himself to the circumstances of the local authorities and say why the Government have found it necessary to discriminate against local authorities in their raising of money from the market in the sense that they cannot offer exemption from Capital Gains Tax, and in the fact that they are not allowed to raise money from markets outside the United Kingdom?

Mr. Lever

As for the Capital Gains Tax point, I should be out of order if I were to pursue it. I do not say that pedantically. I will take it up in debate on the Finance Bill. To discuss it now would be to anticipate debate on the Finance Bill.

As for the point about borrowing abroad, and the point has been made by the hon. Member for Worthing, the Government, far from preventing, have been encouraging the local authorities to use this form of borrowing. In so far as there is any difficulty, it lies in the lack of technical power statutorily in some local authorities, and I think that when we come to the Finance Bill the hon. Gentleman will be gratified to see that we are removing that difficulty, too. So we do not prevent local authorities from borrowing abroad, and we do not limit their borrowing in any way detrimental to their interests.

I hope that the House can dispose of this harmless but rather juvenile bunkum about the rise in interest rates which has taken place in the last 12 months as being due to any decline in the competence of the Government. This is something which relates to every country and to all the financial markets of the world.

As to the argument about Government policy not to try to help people affected by these rates, this Government have done more to shelter the local authorities from the damaging, fluctuating effects of interest rates than any other Government. The hon. Gentleman complains that there has been fluctuation in the rate of lending which the Government charge when there is relending through the P.W.L.B. Of course, that is a statutory obligation which the Act places upon the Government. They are not allowed to on-lend to the P.W.L.B. except at their cost. That was in the Act. Hon. Members opposite welcomed that, they voted for it, they approved of it, but they do not approve our implementing this obligation because it results in changes in the rates.

But that is exactly what the law obliges us to do. So hon. Gentlemen give us an obligation, the duty to on-lend at Government cost, but when we do it they raise objections. They are rather like the character in one of H. G. Wells's novels whose aunt gave him a trumpet on condition that he undertook never to blow it. I think that hon. Gentlemen opposite who voted for this obligation did so on condition that we disobeyed our statutory duty.

As for the Government's policies to help with interest rates, these have been more than fulfilled having regard to the circumstances of the time. The Government brought in the Housing Subsidies Act, 1967, and the result is that the effective interest rate for local authorities for new housing is kept at 4 per cent. whatever the market rate may be, the difference being made up by the Government.

The hon. Member for Worthing was a little less than just to accuse me of flippancy in my election address in 1964. The Government have made good the promise to do everything in their power to help local authorities with interest rates, but neither the Government nor I were promising to hold back the tide of world interest rates. I do not think the hon. Member could have thought so. I hope, incidentally, that neither the hon. Member nor any other hon. Member will mistake an occasional intervention of a lighthearted character by me as being due to lack of serious purpose, because not every hon. Member is guaranteed to address the House with the relentless earnestness which some hon. Members seem to prefer.

I should like the hon. Member for Worthing to bear in mind that the interest rate in modern times has been kept down to 4 per cent. by the Housing Subsidies Act, 1967, but we have not done that to the prejudice of owner-occupiers who want to own their own houses. Indeed, the percentage of owner-occupied houses has gone up during the period of this Government, and that is because of the greatly increased prosperity which, in spite of our difficulties, has resulted in the people of this country enjoying a higher standard of life than ever before in their history, and the best public services in their history.

We never hear the Opposition, despite all their demagogic and opportunist points, pressing for those public services, but all the time they are lecturing the Government on the need to cut down public expenditure. Moreover, the Government give help to local authorities through the rate support grant, which covers 56 per cent. of the relevant expenditure.

I do not want at this late hour to go into the details of the speech of the hon. Member for Worcester about new housing and involving authorities in it. Contrary to what the House may have been led to suppose, interest for new local authority housing is stabilised at an effective rate of 4 per cent. Of other public expenditure by local authorities, 56 per cent. is covered by the rate support grant, and therefore the burden of any interest rate increase is to a considerable degree removed from the local authorities.

About half the local authorities' borrowing is for new housing, where they are not affected by interest rate increases, and over 56 per cent. of the other half is met by the Government. So the present Government have done more to deal with this problem. We are affected by world interest rates, and shall continue to protect the public sector from undue increases in interest rates as much as we can at the crucial points.

I am obliged to say that on these occasions whether we discuss S.E.T., a crisis

for currency or rising interest rates, the Opposition always seem to offer us a hackneyed restatement of our problems in a complacent manner as if they were propounding solutions. They should have learnt by now that describing problems and offering honest, well-documented solutions are two different things. It is very obvious to me that the Opposition's skill lies only in the first area. That is very appropriate for an Opposition. Until they bring a more constructive, serious approach to our problems, we can only regard them as qualifying by practice for an even longer period in opposition.

I therefore close by saying to my hon. Friends that, of course, we all regret the difficulties caused by rising rates of interest. They cannot be escaped, but they can be mitigated at crucial points, as we have done to the best of our ability. I would readily advise my hon. Friends to vote in support of the Motion but for all the humbug, and I would not involve them in anything that looked like an endorsement of the hypocritical pretences of the Opposition.

Question put:—

The House divided: Ayes 232, Noes, 286.

Division No. 170.]	AYES	[7.3 p.m.
Alison, Michael (Barkston Ash)	Campbell, Gordon (Moray & Nairn)	Galbraith, Hn. T. G.
Allason, James (Hemet Hempstead)	Carlisle, Mark	Glover, Sir Douglas
Amery, Rt. Hn. Julian	Carr, Rt. Hn. Robert	Glyn, Sir Richard
Astor, John	Channon, H. P. G.	Godber, Rt. Hn. J. B.
Atkins, Humphrey (M't'n & M'd'n)	Clark, Henry	Goodhart, Philip
Awdry, Daniel	Clegg, Walter	Goodhew, Victor
Baker, Kenneth (Acton)	Cordle, John	Gower, Raymond
Baker, W. H. K. (Banff)	Costain, A. P.	Grant, Anthony
Balniel, Lord	Craddock, Sir Beresford (Spelthorne)	Grant-Ferris, R.
Barber, Rt. Hn. Anthony	Crouch, David	Gresham Cooke, R.
Batsford, Brian	Crowder, F. P.	Grieve, Percy
Beamish, Col. Sir Tufton	Cunningham, Sir Knox	Griffiths, Eldon (Bury St. Edmunds)
Bell, Ronald	Currie, G. B. H.	Grimond, Rt. Hn. J.
Bennett, Sir Frederic (Torquay)	Dalkeith, Earl of	Gurden, Harold
Bennett, Dr. Reginald (Gos. & Fhm)	Dance, James	Hall, John (Wycombe)
Berry, Hn. Anthony	d'Avigdor-Goldsmid, Sir Henry	Hall-Davis, A. G. F.
Biffen, John	Dean, Paul	Hamilton, Lord (Fermanagh)
Biggs-Davison, John	Deedes, Rt. Hn. W. F. (Ashford)	Hamilton, Michael (Salisbury)
Birch, Rt. Hn. Nigel	Digby, Simon Wingfield	Harris, Frederic (Croydon, N. W.)
Black, Sir Cyril	Dodds-Parker, Douglas	Harris, Reader (Heston)
Blaker, Peter	Donnelly, Desmond	Harrison, Brian (Maldon)
Boardman, Tom (Leicester, S. W.)	Doughty, Charles	Harrison, Col. Sir Harwood (Eye)
Boyd-Carpenter, Rt. Hn. John	Douglas-Home, Rt. Hn. Sir Alec	Harvey, Sir Arthur Vere
Boyle, Rt. Hn. Sir Edward	Drayson, G. B.	Hastings, Stephen
Braine, Bernard	du Cann, Rt. Hn. Edward	Hawkins, Paul
Bromley-Davenport, Lt.-Col. Sir Walter	Eden, Sir John	Hay, John
Brown, Sir Edward (Bath)	Elliot, Capt. Walter (Carshalton)	Heald, Rt. Hn. Sir Lionel
Bruce-Gardyne, J.	Errington, Sir Eric	Heseltine, Michael
Bryan, Paul	Eyre, Reginald	Higgins, Terence L.
Buchanan-Smith, Alick (Angua, N & M)	Farr, John	Hiley, Joseph
Buck, Antony (Colchester)	Fisher, Nigel	Hill, J. E. B.
Bullus, Sir Eric	Fortescue, Tim	Hirst, Geoffrey
Burden, F. A.	Foster, Sir John	Hogg, Rt. Hn. Quintin
Campbell, B. (Oldham, W.)	Fraser, Rt. Hn. Hugh (St'fford & Stone)	Holland, Philip
Horden, Peter	Mitchell, David (Basingstoke)	Scott-Hopkins, James
Hornby, Richard	Monro, Hector	Sharples, Richard
Howell, David (Guildford)	Montgomery, Fergus	Shaw, Michael (Sc'b'gh & Whitby)
Hunt, John	Morgan, Geraint (Denbigh)	Silvester, Frederick
Iremonger, T. L.	Morgan-Giles, Rear-Adm.	Sinclair, Sir George
Irvine, Bryant Godman (Rye)	Morrison, Charles (Devizes)	Smith, Dudley (W'wick & L'mington)
Jenkin Patrick (Woodford)	Mott-Radclyffe, Sir Charles	Smith, John (London & W'minster)
Jennings, J. C. (Burton)	Munro-Lucas-Tooth, Sir Hugh	Speed, Keith
Jones, Arthur (Northants, S.)	Murton, Oscar	Stainton, Keith
Jopling, Michael	Nabarro, Sir Gerald	Stodart, Anthony
Joseph, Rt. Hn. Sir Keith	Neave, Airey	Stoddart-Scott, Col. Sir M.
Kaberry, Sir Donald	Nicholls, Sir Harmar	Summers, Sir Spencer
Kerby, Capt. Henry	Noble, Rt. Hn. Michael	Tapsell, Peter
Kershaw, Anthony	Nott, John	Taylor, Sir Charles (Eastbourne)
Kimball, Marcus	Onslow, Cranley	Taylor, Edward M. (G'gow, Cathcart)
King, Evelyn (Dorset, S.)	Orr, Capt. L. P. S.	Taylor, Frank (Moss Side)
Kitson, Timothy	Osborn, John (Hallam)	Temple, John M.
Lambton, Viscount	Osborne, Sir Cyril (Louth)	Thatcher, Mrs. Margaret
Lancaster, Col. C. G.	Page, Graham (Crosby)	Tilney, John
Lane, David	Page, John (Harrow, W.)	Turton, Rt. Hn. R. H.
Langford-Holt, Sir John	Pearson, Sir Frank (Clitheroe)	van Straubenzee, W. R.
Legge-Bourke, Sir Harry	Peel, John	Vaughan-Morgan, Rt. Hn. Sir John
Lewis, Kenneth (Rutland)	Percival, Ian	Vickers, Dame Joan
Lloyd, Rt. Hn. Geoffrey (Sut'n C'd'field)	Pike, Miss Mervyn	Waddington, David
Lloyd, Ian (P'tsm'th, Langstone)	Pink, R. Bonner	Wainwright, Richard (Colne Valley)
Lloyd, Rt. Hn. Selwyn (Wirral)	Pounder, Rafton	Walker, Peter (Worcester)
Longden, Gilbert	Powell, Rt. Hn. J. Enoch	Walker-Smith, Rt. Hn. Sir Derek
Lubbock, Eric	Price, David (Eastleigh)	Ward, Dame Irene
MacArthur, Ian	Prior, J. M. L.	Weatherill, Bernard
Macleod, Rt. Hn. Iain	Pym, Francis	Wells, John (Maidstone)
McMaster, Stanley	Quennell, Miss J. M.	Whitelaw, Rt. Hn. William
Macmillan, Maurice (Farnham)	Ramsden, Rt. Hn. James	Wiggin, A. W.
McNair-Wilson M. (Walthamstow, E.)	Rawlinson, Rt. Hn. Sir Peter	Williams, Donald (Dudley)
McNair-Wilson, Patrick (New Forest)	Rees-Davies, W. R.	Wilson, Geoffrey (Truro)
Maddan, Martin	Renton, Rt. Hn. Sir David	Winstanley, Dr. M. P.
Maginnis, John E.	Rhys Williams, Sir Brandon	Wolrige-Gordon, Patrick
Marples, Rt. Hn. Ernest	Ridley, Hn. Nicholas	Wood, Rt. Hn. Richard
Marten, Neil	Ridsdale, Julian	Woodnutt, Mark
Maude, Angus	Rippon, Rt. Hn. Geoffrey	Worsley, Marcus
Mawby, Ray	Rodgers, Sir John (Sevenoaks)	Wylie, N. R.
Maxwell-Hyslop, R. J.	Rossi, Hugh (Hornsey)
Maydon, Lt.-Cmdr. S. L. C.	Royle, Anthony	TELLERS FOR THE AYES:
Mills, Peter (Torrington)	Russell, Sir Ronald	Mr. R. W. Elliott and
Mills, Stratton (Belfast, N.)	St. John-Stevas, Norman	Mr. Jasper More.
Miscampbell, Norman	Sandys, Rt. Hn. D.
NOES
Albu, Austen	Butler, Mrs. Joyce (Wood Green)	Ellis, John
Allaun Frank (Salford, E.)	Callaghan, Rt. Hn. James	English, Michael
Alldritt, Walter	Cant, R. B.	Ensor, David
Anderson, Donald	Carmichael, Neil	Evans, Albert (Islington, S. W.)
Archer, Peter	Carter-Jones, Lewis	Evans, Fred (Caerphilly)
Ashley, Jack	Castle, Rt. Hn. Barbara	Finch, Harold
Ashton, Joe (Bassetlaw)	Chapman, Donald	Fletcher, Rt. Hn. Sir Eric (Islington, E.)
Atkins, Ronald (Preston, N.)	Coe, Denis	Fletcher, Raymond (Ilkeston)
Atkinson, Norman (Tottenham)	Coleman, Donald	Fletcher, Ted (Darlington)
Bacon, Rt. Hn. Alice	Concannon, J. D.	Foley, Maurice
Bagier, Gordon A. T.	Conlan, Bernard	Foot, Rt. Hn. Sir Dingle (Ipswich)
Barnes, Michael	Corbet, Mrs. Freda	Foot, Michael (Ebbw Vale)
Barnett, Joel	Crawshaw, Richard	Ford, Ben
Baxter, William	Cronin, John	Forrester, John
Bence, Cyril	Crosland, Rt. Hn. Anthony	Fowler, Gerry
Benn, Rt. Hn. Anthony Wedgwood	Crossman, Rt. Hn. Richard	Fraser, John (Norwood)
Bennett, James (G'gow, Bridgeton)	Cullen, Mrs. Alice	Freeson, Reginald
Bidwell, Sydney	Dalyell, Tam	Galpern, Sir Myer
Binns, John	Darling, Rt. Hn. George	Gardner, Tony
Bishop, E. S.	Davidson, Arthur (Accrington)	Garrett, W. E.
Blackburn, F.	Davies, G. Elfed (Rhondda, E.)	Ginsburg, David
Blenkinsop, Arthur	Davies, Dr. Ernest (Stretford)	Gray, Dr. Hugh (Yarmouth)
Booth, Albert	Davies, Rt. Hn. Harold (Leek)	Greenwood, Rt. Hn. Anthony
Boston, Terence	Davies, Ifor (Gower)	Gregory, Arnold
Bottomley, Rt. Hn. Arthur	Delargy, Hugh	Grey, Charles (Durham)
Boyden, James	Dempsey, James	Griffiths, David (Rother Valley)
Bradley, Tom	Dewar, Donald	Griffiths, Eddie (Brightside)
Bray, Dr. Jeremy	Diamond, Rt. Hn. John	Griffiths, Rt. Hn. James (Llanelly)
Brooks, Edwin	Dickens, James	Griffiths, Will (Exchange)
Broughton, Dr. A. D. D.	Dobson, Ray	Gunter, Rt. Hn. R. J.
Brown, Rt. Hn. George (Belper)	Driberg, Tom	Hamilton, James (Bothwell)
Brown, Bob (N'c'tle-upon-Tyne. W.)	Dunn, James A.	Hamilton, William (Fife, W.)
Brown, R. W. (Shoreditch & F'bury)	Dunwoody, Mrs. Gwyneth (Exeter)	Hamling, William
Buchan, Norman	Dunwoody, Dr. John (F'th & C'b'e)	Harper, Joseph
Buchanan, Richard (G'gow, Sp'burn)	Edelman, Maurice	Harrison, Walter (Wakefield)
Butler, Herbert (Hackney, C.)	Edwards, William (Merioneth)	Hart, Rt. Hn. Judith

Haseldine, Norman	Mackintosh, John P.	Reynolds, Rt. Hn. G. W.
Hattersley, Roy	Maclennan, Robert	Richard, Ivor
Hazell, Bert	Macmillan, Malcolm (Western Isles)	Roberts, Albert (Normanton)
Healey, Rt. Hn. Denis	McMillan, Tom (Glasgow, C.)	Roberts, Rt. Hn. Goronwy
Henig, Stanley	McNamara, J. Kevin	Roberts, Gwilym (Bedfordshire, S.)
Herbison Rt. Hn. Margaret	MacPherson, Malcolm	Robinson, Rt. Hn. Kenneth (St. P'c'as)
Hilton, W. S.	Mahon, Peter (Preston, S.)	Rodgers, William (Stockton)
Hobden, Dennis	Mallalieu E. L. (Brigg)	Roebuck, Roy
Hooley, Frank	Mallalieu, J. P. W. (Huddersfield, E.)	Rogers, George (Kensington, N.)
Horner, John	Manuel, Archie	Rose, Paul
Houghton, Rt. Hn. Douglas	Mapp, Charles	Rowlands, E.
Howarth, Robert (Bolton, E.	Marks, Kenneth	Ryan, John
Howell, Denis (Small Heath)	Marquand, David	Shaw, Arnold (Ilford, S.)
Howie, W.	Marsh, Rt. Hn. Richard	Sheldon, Robert
Hoy, James	Mason, Rt. Hn. Roy	Shinwell, Rt. Hn. E.
Huckfield, Leslie	Mayhew, Christopher	Shore, Rt. Hn. Peter (Stepney)
Hughes, Emrys (Ayrshire, S.)	Mellish, Rt. Hn. Robert	Short, Rt. Hn. Edward (N'c'tle-u-Tyne)
Hughes, Hector (Aberdeen, N.)	Mendelson, John	Short, Mrs. Renée (W'hampton, N. E.)
Hughes, Roy (Newport)	Mikardo, Ian	Silkin, Rt. Hn. John (Deptford)
Hunter, Adam	Millan, Bruce	Silkin, Hn. s. C. (Dulwich)
Hynd, John	Miller, Dr. M. S.	Silverman, Julius
Irvine, Sir Arthur (Edge Hill)	Mitchell, R. C. (S'th'pton, Test)	Skeffington, Arthur
Jackson, Colin (B'h'se & Spenb'gh)	Molloy, William	Slater, Joseph
Janner, Sir Barnett	Moonman, Eric	Small, William
Jay, Rt. Hn. Douglas	Morris, Alfred (Wythenshawe)	Spriggs, Leslie
Jeger, George (Goole)	Morris, Charles R. (Openshaw)	Storehouse, Rt. Hn. John
Jeger, Mrs. Lena (H'b'n & St. P'cras S.)	Morris, John (Aberavon)	Strauss, Rt. Hn. G. R.
Jenkins, Hugh (Putney)	Moyle, Roland	Summerskill, Hn. Dr. Shirley
Jones, Dan (Burnley)	Mulley, Rt. Hn. Frederick	Taverne, Dick
Jones, Rt. Hn. Sir Elwyn (W. Ham S.)	Murray, Albert	Thomas, Rt. Hn. George
Jones, J. Idwal (Wrexham)	Newens, Stan	Thomson, Rt. Hn. George
Jones, T. Alec (Rhondda, West)
Judd, Frank	Noel-Baker, Rt. Hn. Philip (Derby, S.)	Tinn, James
Kelley, Richard	Oakes, Gordon	Tomney, Frank
Kerr, Dr. David (W'worth Central)	Ogden, Eric	Tuck, Raphael
Kerr, Russell (Feltham)	O'Mailey, Brian	Urwin, T. W.
Leadbitter, Ted	Oram, Albert E.	Walden, Brian (All Saints)
Ledger, Ron	Orbach, Maurice	Walker, Harold (Doncaster)
Lee, Rt. Hn. Frederick (Newton)	Orme, Stanley	Wallace, George
Lee, Rt. Hn. Jennie (Cannock)	Oswald, Thomas	Watkins, David (Consett)
Lee, John (Reading)	Owen, Dr. David (Plymouth, S'tn)	Watkins, Tudor (Brecon & Radnor)
Lestor, Mrs. Joan	Owen, Will (Morpeth)	Weeitzman, David
Lever, Harold (Cheetham)	Paget, R. T.	Wellbeloved, James
Lever, L. M. (Ardwick)	Palmer, Arthur	Wells, William (Walsall, N.)
Lewis, Arthur (W. Ham, N.)	Pannell, Rt. Hn. Charles	Whitaker, Ben
Lewis, Ron (Carlisle)	Park, Trevor	White, Mrs. Eirene
Lipton, Marcus	Parker, John (Dagenham)	Whitlock, William
Lomas, Kenneth	Parkin, Ben (Paddington, N.)	Wilkins, W. A.
Luard, Evan	Parkyn, Brian (Bedford)	Willey, Rt. Hn. Frederick
Lyon, Alexander W. (York)	Pavitt, Laurence	Williams, Alan (Swansea, W.)
Lyons, Edward (Bradford, E.)	Pearson, Arthur (Pontypridd)	Williams, Alan Lee (Hornchurch)
Mabon, Dr. J. Dickson	Peart, Rt. Hn. Fred	Williams, Mrs. Shirley (Hitchin)
McBride, Neil	Pentland, Norman	Williams, W. T. (Warrington)
McCann, John	Perry, Ernest G. (Battersea, S.)	Willis, Rt. Hn. George
MacColl, James	Perry, George H. (Nottingham, S.)	Wilson, William (Coventry, S.)
MacDermot, Niall	Prentice, Rt. Hn. R. E.	Woodburn, Rt. Hn. A.
Macdonald, A. H.	Price, William (Rugby)	Woof, Robert
McGuire, Michael	Probert, Arthur	Wyatt, Woodrow
McKay, Mrs. Margaret	Pursey, Cmdr. Harry
Mackenzie, Gregor (Rutherglen)	Rankin, John	TELLERS FOR THE NOES:
Mackie, John	Rees, Merlyn	Mr. Ioan L. Evans and
		Mr. Alan Fitch.